On July 8, the New York Stock Exchange (or NYSE) suspended trading on Walter Energy due to a persistent abnormally low stock price. The release said, “NYSE Regulation has informed the Company that the NYSE will apply to the U.S. Securities and Exchange Commission (the “SEC”) to delist the Company’s common stock upon completion of all applicable procedures.”
The release added, “The Company will continue to file periodic and certain other reports with the SEC under applicable federal securities laws. The suspension and commencement of delisting do not affect the Company’s business operations, nor do they trigger any violation of any of the Company’s credit agreements or other debt obligations.” Since the suspension, the stock has been trading on the OTC (over-the-counter) market under the ticker WLTG.
Walter Energy turned into a penny stock soon after the beginning of 2015 and traded consistently below the dollar mark from February 26 until July 7, the last day it was traded before trading was suspended. The last trading price was 16 cents, with a market capitalization of $16.4 million—the same company that was worth over $1 billion not too long ago.
While Walter Energy was worst hit, others are slightly less worse off. Alpha Natural Resources (ANR) and Arch Coal (ACI) have been trading below the dollar mark for a couple of months. Both companies were notified by the NYSE for failing to adhere to the continued listing criteria.
Peabody Energy (BTU) has fallen substantially in recent weeks and closed at $1.62 on July 14. Only a handful of players (KOL) like Alliance Resource Partners (ARLP), Natural Resource Partners (NRP), and Cloud Peak Energy (CLD) are in the safe zone—primarily because they don’t have exposure to metallurgical coal and because they boast cleaner balance sheets. We also expect a wave of consolidation in the coal industry in the next few quarters, primarily driven by ultra-low valuations and the need for a leaner coal industry.
How did a billion-dollar-plus company shrink to just a few million dollars? Let’s see in the next part.