The stock of USF&G Corp. received a shellacking yesterday, falling more than 23 percent after a published report laid out a slate of bearish views on the Baltimore-based insurance giant.
USF&G, which was trading above $30 a share as recently as March, closed yesterday at $7.75 a share, down $2.375 a share, its lowest level in more than a decade.
Nearly 2.6 million of the company's 83.8 million shares outstanding changed hands, making it the most actively traded stock on the New York Stock Exchange.
Analysts who track the company pegged the reason for the unexpected drop on the influential "Heard on the Street" column, published in yesterday's Wall Street Journal, which quoted a number of analysts with negative views of the company.
"USF&G is unusual because of the depth of its problems," Salomon Brothers analyst Michael Frinquelli was quoted as saying.
Another analyst, Gerald Lewinsohn at Merrill Lynch, expressed his concern over the company's large holdings in real estate and junk bonds, which amounted to about$2 billion, or roughly $24 a share, outstripping USF&G's stated book value of about $19 a share. Mr. Lewinsohn said he expects the company to lose 55 cents a share this year and $1.80 a share in 1991.
Yesterday's column -- and the resulting sell-off of the company's stock -- came nearly two weeks after USF&G announced it would slash its quarterly dividend by 66 percent, to 25 cents a share, and cut its work force. The company also said its chairman and chief executive, JackMoseley, would be stepping down in coming weeks to be replaced by an executive who has yet to be announced.
Analysts and the company responded with surprise to yesterday's drop in the company's market price, saying the column presented few new facts to the investing public. The report did, however, hold open the possibility that the dividend would be cut further.
"There are no changes in the business or financial conditions of USF&G Corp. that account for today's market action," said James A. Flick Jr., executive vice president and chief financial officer of the company. "The new CEO will be announced by the board of directors shortly."
Said Denis J. Callaghan at Alex. Brown & Sons Inc. in Baltimore: "The things that were in the 'Heard on the Street' column were nothing new. On the other hand, sometimes these articles, especially from a national publication, will produce that effect, unfortunately from the point of view of USF&G shareholders."