Fiat (FIA.MI) On A Decline- Stocks Tumbled Down By 8.55 percent

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By Mark Michaels on August 6, 2014 Consumer Staples

Stocks of Fiat (FIA.MI) tumbled down by 8.5 percent on the last trading day, August 6, 2014, when the traders showed concerns over the respective stock. A number of traders are worried that the investors who voted against Fiat’s merger with Chrysler will put the deal in jeopardy by selling off their stocks.

The stock, on the last trading day, was recorded at 6.26 Euros. Wednesday’s 8.5 percent decrease partially resulted due to a 3.1 percent decrease of the previous day. The Italian bourse had stopped the trading of the respective stock on many occasions, for Fiat’s (FIA.MI) shares are quite volatile.

The company, on January 1, announced that it would acquire stocks of Chrysler, making the company the 7^th largest automaker corporation. The company’s shares had gained quite a volume since the announcement; however, the recent losses have weighed out the gains.

Fiat (FIA.MI) immensely worried by the crash of its stocks, announced on Tuesday that no stockholder has left the company, neither has anyone showed any intention of doing so.

Sergio Marchionne, the chief executive officer of the company, plans on registering the combined company under the name of Fiat Chrysler Automobiles (FCA), keeping the United States listing with a hope that it will boost up the funding of the company. However, the execution of the deal is subject to a number of conditions. One of those conditions is that the dissenting stockholders, who are willing to sell out their shares, should be kept below a specified number.

One of the traders commented that the problem with the company is the cash exit privileges of the stockholders. The decrease in the stock prices of the company increases the expectation that large groups of people will trade their stocks, and that in turn increases the number of exchanges and sales.

The shareholders of the company gave their consent on the merger on Friday, with a two-third majority of the shareholders who were present in the meeting.

If the number of people exercising their rights to sell out keeps on increasing and the sum that the company owes to the creditors and the shareholders exceed $668 million (500 million Euros), the merger deal will not be executed.

Currently the price of cash exit right is at 7.727 Euros for each share; and if the share prices keep on decreasing, more people will want to sell out their cash exit rights. An increase in the sale of cash exit rights can reduce the funds of the company since it would mean that Fiat (FIA.MI) will have to pay the money to the sellers first, which can in turn put the merger deal in a ditch.

The company, on the last trading day, opened its stocks at a price of $6.51 and closed at a decreased price of $6.47. As far as the 52 week high and the 52 week low of the company are concerned, the figures are reported to be around $9.08 to $5.17. Fiat (FIA.MI) has a market capitalization of 8.15 billion, with an EPS of $0.53