DJ Qwest Down -2: Shareholders Sue Over 1Q Statement
02 Aug 14:40
By Kathy Chu
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Qwest Communications International Inc. (Q) shares hit
another 52-week low Thursday in the wake of two recent lawsuits filed against
the company.
The stock began dropping last Friday - the same day that New England Health
Care Employees Pension filed a suit seeking class-action status on behalf of
other Qwest shareholders. The suit alleges that Qwest executives issued a false
a first-quarter outlook and financial statement, and failed to properly write
down the value of the company's holdings in Dutch data communications company
KPNWest NV (KQIP).
New England Fund's stake in Qwest wasn't available. The fund didn't
immediately return phone calls seeking comment.
Another lawsuit, by shareholders seeking class-action status, was filed late
Wednesday and also alleges that executives made false claims related to the
first-quarter financial results.
These filings are "dredging up" old concerns, according to Drake Johnstone,
an analyst at Davenport & Co. Investors may be particularly concerned by the
complaint filed by the institutional investor, he said, as it's "unusual" for
these shareholders to get involved in class-action lawsuits, Johnstone said.
On June 20, Morgan Stanley Dean Witter issued a research report on Qwest,
raising questions about the health of the telecommunications carrier's balance
sheet. Qwest then took the unusual steps of issuing a press release, holding a
conference call, and submitting a filing to the Securities and Exchange
Commission to respond to the allegations.
Even as Qwest executives blasted the report as "wrong," however, they
disclosed for the first time that the company would take a $3.1 billion charge
for the decline in value of the company's KPN stake.
Johnstone believes that Qwest's June SEC filing responded "well" to
investors' concerns, and the stock's drop in thepast five days is overdone. He
rates the stock a buy with a 12-month price target of $50.
Qwest didn't immediately return phone calls seeking comment.
The company's shares recently changed hands at $23.10, down $2.11, or 8%, on
volume of 17.4 million shares - almost three times the average daily trading
volume. The stock hit a year low of $22.95 Thursday, below the previous 52-week
low of $24.80 set Wednesday.
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