Opinion ID: 781005
Heading Depth: 3
Heading Rank: 5

Heading: Drop in Stock Prices

Text: 38 America West's stock began to decline in late July. The stock value dropped from $29 per share on July 22, 1998 to $21-5/16 on August 4, 1998. The following day, America West announced a new program, authorizing the repurchase of up to five million shares. 7 In the company's release regarding the new program, Franke stated that it reflected America West's belief that its stock was an attractive investment. 39 However, on September 3, 1998, America West announced that it would not meet third quarter earnings estimates because of unsatisfactory operational performance. America West revealed that it was in the process of: (1) purchasing two additional spare airplanes, (2) increasing the number of cities (from four to thirteen) where overnight maintenance capabilities would be available, (3) increasing its inventory of spare parts, and (4) hiring more than 100 mechanics. The stock immediately fell over six points, from the previous day's $20-5/16 per share, to $14 per share on September 3, 1998. The stock continued to fall, reaching a low of $9-5/8 in early October 1998. 40 Immediately after the September 3, 1998 announcement, analysts slashed the forecast for America West's third and fourth quarters of 1998. Oppenheimer downgraded America West because of operational disruptions that were negatively affecting dispatch reliability, on-time performance and therefore earnings. DLJ Securities issued a report stating that the cause of America West's earnings deficiencies appeared to be 100% operational and that these problems were the result of ongoing labor issues and a far more smothering presence of the [FAA] on the `property' than we had understood. The report noted that [t]wo disturbing aspects of yesterday's announcement ... were the facts that the current scenario is reminiscent of operationally-related earnings shortfalls in 1996, and that we had no inkling from the company of the problems....