Wednesday's Worst Stocks in the World

Editors' note: An earlier version of this article implied that Exubera product liability rested with Nektar, which is not the case, according to the company. We regret the confusion.

Bad days. We all have them; some of us deserve them. Here are five stocks whose naughty ways drew investors' scorn on Wednesday:

Naughty?
Well, OK, we can't exactly call these stocks naughty. After all, there are days when five-star winners and newsletter recommendations appear here. Today isn't one of those days.

If you're an investor, you'll have plenty of bad days. The trick is to avoid dating -- or, worse, marrying -- your losers. That's why I listen when our 96,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should, too.

Thus, here is today's list of the worst stocks in the world.

Worse
We begin with Westwood One, a former guest in this column for its rapidly declining margins and returns on capital, which yesterday suffered a setback when a judge declined to dismiss a lawsuit against it.

The case is being brought by Pompano Helicopter, which alleges that Westwood One tried to drive it out of business and take over its contracts to provide helicopters for news and traffic reporting. Westwood One denies the allegations as well as Pompano's characterization of the penalty to Westwood One if it loses the case ($363 million in damages, according to press reports).

I've no idea who's right and, honestly, I don't care. So long as Westwood One is embroiled in an unseemly legal tussle, investors in its stock are unlikely to see market-beating returns.

Worser
Next up is Nektar Therapeutics, which suffered a 25% haircut when partner Pfizer (NYSE: PFE) said that it has observed a higher incidence of lung cancer among patients who took its inhaled diabetes treatment, Exubera, although all the patients who developed the disease were present or past smokers.

So widespread was the panic surrounding the news that peer MannKind (Nasdaq: MNKD), which is also working on an inhaled form of insulin, was down nearly -- wait for it -- 60% on Wednesday. I'm not at all sure that's fair. (Though, as of this morning, MannKind has suspended talks with potential partners for the drug.)

But for Exubera creator and owner Nektar, exactly none of this news is good. At the very least, it's a PR nightmare.

Worst
But our winner is Krispy Kreme, which yesterday announced that it is trading strict financial covenants governing its debt for higher interest rates. Quoting from a company statement:

The amendments also provide that the interest rate on the loans outstanding under the facilities will increase from LIBOR [the London interbank loan rate] plus 3.50% to LIBOR plus 5.50%, with a minimum LIBOR rate of 3.25%, and fees on letters of credit outstanding under the facilities will increase from 3.75% to 5.75%.

Over the year ended Oct. 28, 2007, the date of the most recently available report, Krispy Kreme paid $12.4 million in interest expense on an average debt balance of $103.2 million. That's 12%. I know credit cards that charge less than that. And now the rate for some of its debt is going up?

Yeesh.

Krispy Kreme and its still debt-dunked business model ... Wednesday's Worst Stock in the CAPS world.

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I'll be back tomorrow with more stock horror stories.