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Trading Resumes; Shares Sink 93%

Markets: Volume in the company's shares set a record at 1.5 billion. But buyers' motives baffled some analysts.

July 02, 2002|From Times Staff Writers

Trading in WorldCom Inc.'s shares resumed Monday and set a volume record--as they lost nearly all of their value.

It was obvious why investors would be selling WorldCom stock, analysts said, but the motivation of many of the buyers baffled some veteran traders: WorldCom is widely expected to file for bankruptcy protection, and many Wall Street pros believe the stock will wind up worthless.

Volume in WorldCom reached 1.5 billion shares on Nasdaq on Monday, as trading reopened after a three-session halt. That far surpassed the previous record for a U.S. stock, which also was held by WorldCom, when more than 670 million of its shares traded May 14.

WorldCom's stock plummeted from its closing price of 83 cents on June 25 to end Monday at 6 cents, a drop of nearly 93%.

The company's MCI tracking shares also resumed trading, and also collapsed: MCI fell $1.44 to 24 cents on Nasdaq, as 27.5 million shares changed hands.

Analysts said WorldCom's massive trading volume reflected the huge number of shares outstanding, which was nearly 3 billion shares as of April 30, according to Bloomberg News data.

Some of the buying Monday was done by "short sellers" who previously had borrowed WorldCom stock and sold it, betting the price would drop. Short traders must close out their bets by repurchasing stock and returning it to the lender.

But the huge volume suggested that many speculators were stepping in to buy the shares, perhaps hoping to sell them for even a penny more per share in the next few days or weeks.

Even in cases of stocks that are expected to ultimately be worthless, it isn't unusual for the shares to continue to trade at some value indefinitely.

On Monday WorldCom appeared to trade in a narrow range of 6 cents to 8 cents for most of the day.

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