Big Dilution Threat Makes Calgon a Sell

Article Excerpt

CALGON CARBON CORP. $4.58 (New York symbol CCC; Aggressive Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) lost $6.7 million or $0.17 a share before one-time items in 2005. That violated the terms of some of its long-term loans, and forced Calgon to re-classify these loans as short-term. Calgon now plans to pay down these loans by issuing up to $75 million in new, 30-year debentures convertible into common shares at $5.10 a share. Investors dislike convertible debt issues since they can raise the number of shares a company has outstanding and cut into future per-share earnings growth. The conversion of all of the debentures would increase the number of shares outstanding by a third. The news triggered a 27% drop in Calgon’s stock price. Calgon’s water purification technology has strong growth potential, and it continues to win new contracts, including a recent deal to supply granular activated carbon to a city in South Korea. But the threat of a large…

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