Ferranti Loses One-Third of Value on London Market

British defense contractor Ferranti, shellshocked by apparent fraud at its U.S. unit which has cost it almost $300 million, lost about a third of its market value today when its shares resumed trading on the London stock exchange.

Shares in Ferranti International Signal PLC opened at 81 cents, 32% below the $1.19 price at which they were suspended Sept. 11 when the scandal broke.

Within seconds, the shares dipped even further but then recovered to stabilize. Last February they touched their high for the year at $1.83.

The company, which specializes in military electronics, has been rocked by what it said was a costly fraud involving contracts of its U.S. subsidiary, ISC Technologies, based in Lancaster, Pa.

Ferranti has alleged that it inherited three fraudulent contracts when it bought ISC, a weapons firm selling mainly to Third World customers, in 1987.

As a result, the British company will have to write off 185 million pounds ($299 million) and halve its stated 1988-89 profits.

Ferranti has said it is discussing a range of options to bring in new capital, including a complete takeover, a rights issue and a minority partner.

But some analysts believe a predator could strike before Ferranti management clinches its own rescue deal.

“If you wanted to build a stake in Ferranti, today provides a good opportunity to snap up stock without drawing too much attention,” one dealer said.

Ferranti topped the actives list with more than 70 million shares changing hands in the first hour of trading.

The opening share price valued the whole of Ferranti at $605.4 million, down from its market capitalization of $890 million at the suspension date.

Market analysts said the share price was higher than expected and predicted that it will eventually settle at between 65 cents and 73 cents.