Reflecting how the financial sector's meltdown has reverberated beyond Wall Street, investors wiped out about 70 percent of the value of Constellation Energy Group's stock at one point yesterday, despite little information about how or whether the Baltimore energy company's trading operations are affected by the demise of Lehman Brothers and other firms.
Constellation shares lost nearly 36 percent, or $17.23, to close yesterday at $30.76 on the New York Stock Exchange.
The closing price was the lowest since May 2003, according to Bloomberg News, but it could have been much worse: At one point, the stock fell to $13 before recovering in the final hour of trading.
That's on top of an 18 percent decline on Monday after Lehman's bankruptcy filing and the fire sale of Merrill Lynch to Bank of America resulted in a broader market selloff.
Constellation is one of only two Fortune 500 companies headquartered in the Baltimore area. It is the area's eighth-largest private employer with about 4,500 jobs, according to the Economic Alliance of Greater Baltimore, and its stock is widely held by individuals and institutions.
Credit Suisse analysts said yesterday in a research report that Constellation suffered on "no explicit news but on a series of fears" about whether its complex, and often opaque, trading operations would have difficulty finding the large amounts of short-term financing and partners needed to make trades.
Constellation said in a regulatory filing Monday that Lehman's bankruptcy has no significant impact on its energy-trading and credit relationships. It made no statements yesterday, and spokesman Robert Gould would not comment.
While Constellation is still widely thought of as a utility company, because of its ownership of Baltimore Gas and Electric, it now gets 83 percent of its revenue from merchant operations, which are not regulated by the state.
It trades in electricity, natural gas, coal and other energy products all over the world. Part of that business takes large positions in electricity markets, placing bets on where prices will go.
The business relies heavily on its ability to access financing, which is highly sensitive to Constellation's credit-worthiness. While Constellation has a credit line of $150 million with Lehman Brothers Bank, it also has about $2 billion in other liquidity available, according to the SEC filing.
Still, some analysts pointed to credit concerns exacerbated by recent market turmoil.
