Investors continued to cane rural servicing company PGG Wrightson yesterday, stripping a further a 23c off its share price, which closed trading last night at 59c, a drop of 54% since Monday.
Shares in PGG Wrightson (PGGW) were now at their lowest level since October 2000, but investors yesterday also turned their attention to New Zealand Farming Systems Uruguay (NZFSU), 10.6% owned by PGGW and 5.9% by Rural Portfolio Investments.
Shares in NZFSU fell 16c, or 28% for the day, closing trading at 40c.
Forsyth Barr investment adviser Tony Conroy said investors had concerns about the level of PGGW's core debt, excluding its finance arm, given the current economic environment.
"With the credit crunch uppermost in people's minds, companies with high debt levels are being punished."
Investors had also linked the two companies, which have common shareholding, with Dunedin-based Rural Portfolio Investments a significant shareholder in both companies and PGGW a cornerstone shareholder in NZFSU.
Rural Portfolio Investments was the investment arm of Dunedin brothers Baird and Allan McConnon and former Fonterra chief executive Craig Norgate.
Mr Conroy said PGGW had about $310 million in debt, but a $19 million six-month loss reported by NZFSU this week was accompanied with news it was after extra capital to continue its conversion of land in Uruguay to dairying.
Given PGGW's debt, it was difficult to see where money for NZFSU would come from and what the company would do next, Mr Conroy said.
Investors were also unsettled by the spat this week with Silver Fern Farms (SFF) over compensation for PGGW last year failing to complete the $220 million partnership with the Dunedin meat co-operative.
PGGW chairman Craig Norgate said earlier this week he was looking at a settlement of about $10 million, but a hostile reaction from SFF has many people speculating the issue might be heading towards a showdown in court.
Mr Conroy said the two stocks were also caught up in the end-of-week global sharemarket rout and the general negative sentiment in markets around the world.
"The problem is that it is difficult to predict anything and investors are reacting to what they know."
On the back of the poor NZFSU six-month result, Forsyth Barr has revalued the share price down from $1.76 to $1.09 but has retained a hold recommendation.
