Thursday was a surprisingly positive day on Wall Street, with major market benchmarks posting gains of between 1.25% and 1.5% on the day, despite the sense of anticipation about a long-awaited event. For weeks, investors have had their attention on Great Britain, where voters went to the polls today to vote on whether the U.K. would remain part of the European Union. Early indications had suggested that an exit was likely, but in recent days, the pendulum has appeared to swing toward staying in the EU.
Investors in the U.S. have taken that as an encouraging sign, and that helped the Dow climb more than 230 points to top the 18,000 mark. However, some stocks missed out on the celebration, and among the worst-performing investments on the day were Whiting Petroleum (NYSE:WLL), Finish Line (NASDAQ:FINL), and the iPath S&P 500 VIX ST Futures ETN (NYSEMKT:VXX).
Whiting Petroleum fell more than 6% after the company came to an understanding with creditors to exchange more than $1 billion in existing debt for mandatory convertible notes for the same total-principal amount. The exchange has no impact on the maturity dates of the notes, but they allow the energy company to force note holders to convert a portion of their notes into shares of Whiting common stock if the price of the stock exceeds $8.75 per share on a weighted-average basis during each of the next 25 trading days.
Given that the stock currently trades above $11 per share, the likelihood is that bondholders will end up with between 83 million and 115 million shares of stock. That represents a huge amount of dilution for a company that previously had only about 210 million shares outstanding.
Finish Line dropped 4% as investors await the athletic-shoe retailer's first-quarter earnings report on Friday. Shareholders currently expect the company to report a modest 1% gain in overall revenue, but earnings per share will drop by roughly 25% from year-ago levels.
The retailer already plans to close many of its less-profitable store locations during the next several years in an effort to boost earnings growth. However, intense competition among footwear manufacturers seeking to build out their own direct-distribution channels to customers via company websites and proprietary-store networks could eat into Finish Line's growth prospects. Moreover, rival Foot Locker will continue to fight hard to take advantage of the bankruptcy of industry peer Sports Authority, and hold back Finish Line's ability to grow.
Finally, the iPath S&P 500 VIX Short-Term Futures ETN dropped almost 10%. The exchange-traded product is designed to track the most-popular measure of stock-market volatility. On days when the stock market performs particularly well, the underlying volatility index tends to drop precipitously.
The move comes as a shock, given the anticipation of what could be extensive market moves depending on the way the Brexit decision goes. However, today's move is just the latest in a long series of setbacks for long-term holders of the exchange-traded product, and despite some occasional short-term spikes, the trajectory of the iPath ETN has pointed downward for years because of the resolute nature of the long bull market.