Why Mechel OAO Shares Dropped Today

What: Shares of Mechel OAO  (NYSE: MTL  ) fell as much as 17% today as investors sold off Russian stocks because of a potential conflict with Ukraine.

So what: The Russian ruble hit an all-time low today as Moscow postured for control of Crimea, an area of Ukraine. Stock markets also fell in Russia and around the world. It doesn't help that Russia's central bank raised interest rates 1.5% today, too.

Mechel's position in Russia and $9.4 billion in debt as of December is concerning. Investors don't like the uncertainty that comes with this stock today.  

Now what: There are a lot of unknowns right now when it comes to Russia and Ukraine, but investors aren't taking the risk of owning a highly leveraged Russian company such as Mechel today. The sell-off isn't surprising but it also doesn't necessarily mean doom for the mining and metals company if the conflict doesn't escalate. That said, there are a lot of risks, and the high debt load and rising interest rates are a threat to Mechel's long-term survival. There may be a pump if the conflict cools down, but that's not a risk I'm taking today.

A better buy for you today
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 04, 2014, at 12:13 AM, zzwildman wrote:

    facts are with huge debt load MTL has decided to sell 50% Elga coal deposits to an Asian investor for over 10% debt which will clear debt payments for 2014. Investment is guaranteed by coal which China & South Korea purchase. If and it is an if that with the pending war which will be short lived in time will the investors accommodate MTL? Most likely the Asian investors from China will not be concerned with Russian Politics both from communist countries. That is arrogance Putin is counting on. As for MTL where is the bottom? As for a huge rebound will the shorts be trapped in bullish news on debt control? It can happen.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2862352, ~/Articles/ArticleHandler.aspx, 10/24/2014 11:03:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement