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This company’s shares are down 96%

In the last five years, the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has fallen 9%. But some companies’ shares have done much, much worse.

Shares of surfwear company Billabong (ASX: BBG) have fallen a shocking 96%, while shares of Fairfax Media (ASX: FXJ), publisher of The Australian Financial Review and The Sydney Morning Herald, among others, have fallen over 80%. The chart below illustrates these jaw-dropping declines.

Billabong and Fairfax Media against the AXJO, last 5 years

Falling knives or potential opportunities?

Both Billabong and Fairfax could be called ‘falling knives’ as companies that have more or less steadily declined in value year after year, disappointing value-minded investors. Still, from such cheap prices today, it’s possible either company could come roaring back.

Billabong may be the less likely to do so. Over the last year, several would-be bidders are known to have walked away from the negotiating table after examining the company’s books.

U.S. private equity firm and last bidder standing, Sycamore Partners, is said to have recently lowered its bid from $1.10 to just 60 cents a share, “or exchange for scrip in a Sycamore subsidiary company that will be created to hold the Billabong business,” as The Australian has reported. An even lower offer could be in the works as well.

Billabong shares (last closing at 45 cents) are currently in a trading halt while the final outcome of negotiations should be released tomorrow. If Sycamore walks away, the price of shares is likely to plummet even further, at least in the short term.

Fairfax and the digital future

Fairfax Media, for its part, posted a massive $2.7 billion loss for the 2012 financial year, primarily to do with write-downs in the value of its various media properties. Yet its internet businesses, including Domain, Stayz, and RSVP, and the company’s plan to restructure its divisions for the digital age could lead to a brighter future.

When Credit Suisse analysts recently assigned a potential value to shares, the range of outcomes proved very wide indeed — from 21 cents at the low end to 86 cents at the high end, while shares currently trade for around 64 cents.

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More reading

Motley Fool contributor Catherine Baab-Muguira has no financial interest in any of the companies mentioned in this article. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.


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