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Otter Tail faces bump in road
Published Saturday, September 20, 2008
The recent drop in Otter Tail Corporation stock prices may look alarming, but Otter Tail Shareholder Services Director Loren Hanson said it’s only a bump in a long road set to bring about future prosperity.
As of 3 p.m. Friday, Otter Tail stocks were at $30.05 a share, down from Thursday’s close at $33 a share. That’s a dramatic drop from Sept. 12 closing share price of $40.
The dip in the price was expected, Hanson said, as share prices usually drop when adjustments are made to a company’s revised earning guidance — an action taken by Otter Tail Corporation last week, at the same time they opened 5 million shares to the public in an attempt to generate revenue for the expansion of its wind tower manufacturing facilities and the construction of a new wind center in Barnes County, N.D.
“You never know for sure what price, but you certainly expect the price to drop,” Hanson said.
The drop, however, was more than Otter Tail had anticipated. Issues taking place in the market played into the lower than expected share price, such as the dramatic drops in the financial market. Another factor was the buy-out of energy company Constellation Energy Group who, because of credit rating issues, was absorbed by MidAmerican Energy, which is owned by Berkshire Hathaway.
“That cast a dark shadow on our industry, as well as other things going on in the market that you don’t have any control over,” Hanson said.
In 2004, an offering of 2,750,000 of Otter Tail’s common shares were issued to the public, allowing the corporation to successfully finance their purchase of Idaho Pacific. Otter Tail also saw a dip in share prices during that time, too.
However, it was a completely different time in the market.
“It’s kind of like comparing apples to oranges,” he said.
Shareholders who have contacted Otter Tail Corporation today to discuss the drop in prices have been advised to focus on the long-term.
“The key thing here is the long-term focus,” Hanson said. “Any time you get caught up in the short-term, there are going to be bumps.”
As far as short-term future projections, Hanson says it’s hard to say, but is more than likely to level out.
“It’s hard to predict,” Hanson said. “Certainly, usually after the market absorbs the additional shares is a leveling off period.”
All-in-all, Hanson says the long-term focus for the corporation is on the up.
“We’re really expecting, even though it is disappointing what we are going through right now, we’re excited for what the future holds,” Hanson said. “These investments we’re making in wind related projects are setting the stage for growth in our company.”
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