THE fallout from the collapse of investor confidence in Babcock & Brown has swept through financial giant Macquarie Group, with its shares hit by a huge sell-off that drove its price down to levels not seen since late 2004.
In a day that mirrored similar sudden losses since the start of this year, Macquarie shares plummeted almost 10%, shedding $4.44 to $41.61.
Macquarie shares have fallen 24% since August 13, when they traded at $54.10.
One of the triggers was a report from the investment bank UBS, which cut its “buy” recommendation on the stock to “hold” and reduced its target price from $60 to $48 on concerns about Macquarie’s ability to withstand another year of the credit crunch.
UBS also raised questions about the strength of the balance sheet. Macquarie says it has $3 billion in excess capital but UBS estimates that the real buffer could be about $150-500 million.
In May last year, the stock almost reached $100, valuing the company at about $27.6 billion. Yesterday, after a sustained day of selling thought to have involved hedge funds targeting the stock and institutional investors concerned about its debt-driven business model, its market value was $11.6 billion.
A spokesman for Macquarie declined to comment on the UBS report or drop in the bank’s share price. Macquarie shares ended down 9.6% at A$41.61 in a flat Sydney market. In a response to a query from the Australian Securities Exchange, Macquarie said it isn’t aware of any explanation for the sharp fall in its shares.
Last week’s fall from grace of Babcock & Brown, whose debt troubles prompted the departure of chief executive Phil Green and the dumping of its financing structure, has focused renewed investor attention on Macquarie, the first and most successful of the asset and fund management operators.