Shares of Scheib Soar in Wake of Founder’s Death
Stock of Earl Scheib Inc. soared 47% on the American Stock Exchange on Monday, as investors speculated about the company’s future on the first trading day since the founder of the discount car painting business died.
Earl A. Scheib, widely known for television commercials in which he touted rock-bottom prices, founded the chain in the 1930s. The company, based in Beverly Hills, has more than 200 shops in 40 states.
Scheib was chairman and president of the firm when he died Saturday at 85 of probable heart failure. He had suffered from emphysema the past two years.
Wall Street analysts and some investors said much of the sudden interest in Scheib, which caused the stock to shoot up $4 to $12.50 per share, stemmed from speculation that the firm will be sold partly to help pay its founder’s estate taxes.
“Many are buying the stock because of speculation that Scheib’s stock will be inherited by people who might want to sell the company,” said Alfred E. Goldman, vice president of A. G. Edwards & Son, a St. Louis-based brokerage.
However, Irwin R. Buchalter, the company’s secretary and general counsel, attributed the increase to investor optimism about the future of the company under new leadership. Buchalter said he does not believe that the company will have to sell assets to pay taxes.
“I assume people in the investment community believe there will be a substantial and positive change in the direction of the company,” Buchalter said.
Buchalter predicted that Donald Scheib will succeed his father as president. Buchalter said that he, himself, expects to be selected head of the board.
Before trading in the stock commenced Monday, Scheib Inc. announced that its board of directors will meet in seven days to elect a new chairman and president. The American Stock Exchange delayed trading in the stock until 11:30 a.m. to allow the company to relay news of the board meeting and Scheib’s death.
When trading started, shares surged on heavy volume. In all, 108,400 of the 4.56 million outstanding were traded. On a typical day, trading of Scheib is in the 3,000-share range.
Scheib owned 37% of the shares; investment funds and other institutional investors control 45%. Scheib’s three sons are expected to assume control of his stake.
Buchalter said the company may have to review its legendary prices, which stayed at $29.95 for decades during the company’s early history. Many consumers aren’t repainting their vehicles because today’s paint jobs last longer, he said. The company raised its basic paint-job price from $99.95 to $119.95 nine months ago.
