Cendant Down 10% as Worries Spread
Analysts at two brokerages helped push Cendant Corp. shares lower Tuesday by telling clients that the Wall Street Journal may be preparing an article critical of the company’s accounting.
But Cendant, which franchises Days Inn hotels and Coldwell Banker residential brokerages and owns the Avis rental car business, said it is “not aware of any impending negative news media story.”
Nonetheless, the stock slid $1.83, or 10%, to $16.52 on the New York Stock Exchange.
“This is typical of the times,” said Thomas McIntyre, a portfolio manager with Dessauer & McIntyre Asset Management, which owned 1.4 million Cendant shares as of the end of September. “Investors are shooting first and asking questions later.”
Brokerage Credit Suisse First Boston told clients Monday night that the Journal was working on a story related to Cendant’s accounting, analysts and investors said. A Lehman Bros. analyst followed Tuesday with a note to clients saying he had talked to the paper about an article, said McIntyre.
The Credit Suisse analyst who follows Cendant, Scott Barry, and the Lehman analyst, Jeff Kessler, could not be reached for comment.
A spokesman for the Journal said the paper does not discuss stories the paper may or may not be working on.
Enron Corp.’s collapse in December was fueled in part by revelations that it hid losses in off-balance-sheet partnerships.
Cendant has stakes in seven ventures that can be considered off the balance sheet, said Jay Leupp, an analyst at brokerage Robertson Stephens. These ventures contain $1 billion to $1.5 billion of debt, he estimated. But “Cendant hasn’t used these off-balance-sheet ventures to hide debt,” he said.
Still, Cendant may be especially vulnerable to accounting concerns because of its history. The company’s former chairman, Walter A. Forbes, was accused of overstating earnings at CUC International, which merged with HFS Inc. in 1997 to create Cendant. Cendant later restated three years of earnings and agreed to pay $2.83 billion to settle a suit accusing the company of defrauding shareholders.
