Street.com weighs in on WEL, LOL: thestreet.com
Boots & Coots Jumps Despite Bankruptcy Threat
By Matthew Goldstein
Senior Writer
03/18/2003 03:56 PM EST
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It's usually a red flag for investors when a company warns it may file for bankruptcy. Yet that threat hasn't stopped investors from piling into shares of Boots & Coots (WEL:Amex - news - commentary - research - analysis) in the past few weeks.
Shares of the Houston-based company that made a name for itself putting out the oil-well fires during the first Iraq war are up more than 900% this year, rising from 16 cents a share to $1.76. On Tuesday alone, shares nearly doubled, rising 57 cents on heavier-than-normal trading.
It appears that with the nation just hours away from invading Iraq, Boots & Coots has become the speculative stock of the moment for those trying to make a quick buck off the war. If Saddam Hussein orders his soldiers to set the nation's oil wells ablaze, Boots & Coots could be called into action again.
In the past Boots & Coots has had a working relationship with Halliburton's (HAL:NYSE - news - commentary - research - analysis) Kellogg Brown & Root subsidiary, which the Pentagon has tapped to oversee the efforts to control any oil-well fires. (Halliburton is the company formerly led by Vice President Dick Cheney.)
But for investors, sinking money into Boots & Coots looks like a bit of a gamble and may be best suited to daytraders, not longer-term investors.
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Last month Boots & Coots announced it's considering filing a bankruptcy reorganization plan along the lines of one that's been proposed by its main creditor, Checkpoint Business. In January, Checkpoint notified Boots & Coots that it was in default on its loan agreement. A few weeks later, Boots & Coots and Checkpoint renegotiated some of the terms of that loan, but the company's finances remain in a precarious situation.
During the first nine months of last year, the company recorded a net loss of $7.6 million. Its revenue dropped by 19% to $11.5 million. Boots & Coots' most recent quarterly filing included a comment raising doubts about the company's ability to continue as a "going concern."
The danger for investors is that once a company files for bankruptcy, the existing stock usually becomes worthless. That's because stockholders stand last in line behind a company's creditors and bondholders in laying claim to a company's assets. |
