LOS ANGELES (AdAge.com) -- Interpublic Group of Cos. stock slumped to a two-year low of $10.05 today, falling nearly 9% on heavy volume from its Oct. 17 close before recovering the majority of its losses. As of late morning, the stock traded at $10.71, down 2.7%.
IPG Offers Details Behind $550 Million Restatement
'Material Weakness' in Agency Oversight Cited
IPG Earnings Restatement Drops a Half-Billion Dollars
Filing Cites Seven Instances of Employee Misconduct
IPG to Restate Earnings Again
Reports 'Possible Employee Misconduct' Found
Interpublic Group Names New CFO
Frank Mergenthaler Was Formerly With Columbia House
SEC Widens Investigation of IPG
CFO of Embattled Holding Company to Leave
Interpublic Issues Unaudited 2004 Results
Operating Loss Estimated at $285 Million; CEO Defends Agencies
Cloud Over IPG Darkens
Possible New Financial Restatements and Extensive 'Material Weaknesses' Revealed
Interpublic Delays Release of Earnings Report
Cites 'Items That May Require Adjustments'
IPG Names Michael Roth New CEO
David Bell Moves to Co-Chairman
Interpublic to Settle Shareholder Lawsuits
Company Will Pay $115 Million in and Stock
Lawsuit Alleges 'Accounting Manipulations' at Interpublic
Current and Former Top Executives Named as Defendants
David Bell Named Interpublic Chief
John Dooner Steps Down, Will Return to Head McCann-Erickson WorldGroup
Interpublic Stock Hits 10-Year Low
Analysts Say New Credit Agreement Less Harsh Than Expected
SEC Launches Formal Probe of IPG Accounting
Focus Includes Five Years of Earnings Statements
The stock drop appeared tied to the advertising holding company's announcement after the market closed Oct. 17 that it plans to sell up to $575 million in new convertible preferred stock to institutional investors. Interpublic said it would use the money "for general corporate purposes."
Diluting future earnings
Because the preferred stock could be converted in future years to common stock, it has the effect of diluting Interpublic's common shares. Merrill Lynch analyst Lauren Rich Fine, in a report this morning, said she expects the offering to dilute Interpublic's 2006 earnings per share by 25%, from 20 cents to 15 cents.
Interpublic intends to sell $500 million in preferred stock, and up to $75 million in additional stock if an over-allotment option is exercised.
Ms. Fine said she believes Interpublic "is shoring up its balance sheet," adding that some money "could be used for small tactical acquisitions."
The stock sale was to start and close today, signaling a quick move by Interpublic to add cash to its balance sheet.
In a conference call with investors late this morning, Interpublic Chairman-CEO Michael Roth said the company planned to use the money to pay for vendor credits, professional fees such as accounting and severance payments.
Mr. Roth offered no details about severance, but his comment suggests Interpublic is preparing for more job cuts.
Interpublic has been working to fix operating and accounting problems since it disclosed accounting errors in August 2002. The stock's low point since then came on March 7, 2003, when the stock bottomed at $7.20 a share. Today's low marked the lowest price since May 9, 2003, when shares traded at $9.45.