Investors Desert Tyco In Wake Of Enron Collapse

by Mike Godfrey, Tax-News.com, New York

31 January 2002

Bermuda-based conglomerate Tyco, which announced last week that it would break itself up, lost 15% of its value on the NYSE on Tuesday, affected by concerns over possible dubious accounting practices, despite vigorous denials from the company.

Hit by generalised concern in the backwash from the Enron affair, shares in Tyco fell $6.50 to $35.50. Tyco shares have lost almost a quarter of their value since the announcement by Dennis Kozlowski, Tyco's chief executive, who claimed that it would enhance Tyco's value by at least 50 per cent. The shares are now at their lowest level for more than two years.

Following Enron's collapse, market operators have aggressively shorted companies such as Tyco, where investors might be uncertain or worried by unexpected developments. Mr Kozlowski has spent the past week meeting investors in an attempt to persuade them of the merits of his plan, which was prompted by his frustration at the company's continued low stock market rating.

But growth-oriented investors who have supported Tyco while it continued to make acquisitions are now likely to sell. Many of these shareholders also lost heavily from their investments in Enron and may be keen to avoid further losses. Meanwhile, value-oriented investors who may be attracted by the prospect of Tyco breaking itself up are likely to wait until the company publishes more information about the three divisions it plans to spin off.

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