Stock mystery is nicely spicy

Voting and nonvoting McCormick shares turn strange loners

May 16, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Officials at McCormick & Co. have asked regulators to investigate an unusual divergence in the prices of the Sparks-based company's two classes of stock.

The voting and nonvoting shares have historically traded within about a half-dollar of each other. But since the beginning of the year, the two have been charting different paths.

The voting shares are now selling at about $10 less than the more widely traded nonvoting stock.

Also puzzling officials is why holders of voting shares would sell them on the market when they can trade them in to the company for nonvoting stock at no charge. By selling them on the market, they are getting less for their shares and paying a brokerage commission.

"Somebody just doesn't understand or follow it," said Robert J. Lawless, McCormick's chairman, president and chief executive. "There's no other reason to do it unless you want to lose money."

McCormick has asked the National Association of Securities Dealers to look into the matter in hopes of making sure brokers understand that the two stocks historically have been valued about equally.

A spokeswoman for the NASD said yesterday that the agency never comments on or even confirms investigations.

The spice maker also sent out about 2,500 letters to shareholders reminding them that they can swap the stock at no charge.

Lawless said he is not concerned that someone outside the company is trying to buy up the voting shares.

"My only concern is that the voting stock is trading for less, and we're working aggressively to figure out why and figure out a quick resolution," he said.

There are about 69 million shares outstanding of the nonvoting stock and about 8 million of the voting.

About a quarter of the voting shares are held by the company's profit-sharing plan and 15 percent are held by the McCormick family. A large majority of the balance is held by current and retired employees and their descendents.

Very few voting shares, which are quoted on the Pink Sheets and sold over the counter, ever change hands.

Several days can go by with no recorded trades, and when they do occur, they are often in blocks of less than a thousand shares. They last traded Monday at $28.50.

The nonvoting stock, meanwhile, is traded on the New York Stock Exchange with hundreds of thousands of shares trading daily. It closed yesterday at $37.93.

"The discount [of the voting shares] reflects the lack of liquidity and the fact that major institutions can't participate," said John McMillin, an analyst at Prudential Securities, adding that the price difference doesn't bother him.

"It's an incorrect spread," he said, "but it's not big enough to matter."

Cromwell Coulson, chairman of Pink Sheets, had another explanation.

"It's basically the stupidity of the market," he said. "The markets get very inefficient every once in a while."

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