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Why Frontier Communications, Seattle Genetics, and Arconic Slumped Today

By Dan Caplinger – Jun 26, 2017 at 4:57PM

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These stocks dropped despite a mostly flat market. Find out why.

Monday ended quietly on Wall Street, with the Dow and S&P 500 moving higher by less than a tenth of a percentage point. The Nasdaq went in the opposite direction, falling more than a quarter percent as investors favored more defensively positioned companies over the technology stocks that dominate the Nasdaq's top companies. Yet even though changes for the overall market were largely modest, several stocks suffered much bigger losses. In particular, Frontier Communications (FTR), Seattle Genetics (SGEN -1.03%), and Arconic (HWM -0.92%) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.

Frontier keeps trying to shore up its balance sheet

Frontier Communications stock fell 7%, adding to more extensive losses it posted over the past week. The telecommunications company has been working hard to try to get itself out of its precariously leveraged situation on its balance sheet, announcing today early tender offer results for several series of outstanding notes. The company has sought to buy back notes that mature between 2018 and 2021, in some cases paying well above par value to do so. Interest in the tender was strong, and Frontier ended up raising the amount of debt it bought back from $800 million to $1.15 billion. The net result was to dramatically reduce one debt issue carrying an interest rate of almost 9%. That will improve Frontier's cash flow, but many investors are still skeptical that Frontier will be able to survive the bad news it has received lately, including customer losses and other financial challenges.

Frontier logo and message.

Image source: Frontier Communications.

Seattle Genetics falls despite mildly encouraging trial data

Shares of Seattle Genetics finished down more than 8% even though the biotech company had generally positive things to say about recent phase 3 trial data. The company has been investigating its already-approved Adcetris treatment for more extensive use by patients with Hodgkin lymphoma, hoping to add the option of having doctors use the drug as a first-line treatment rather than having to use it in conjunction with chemotherapy drugs and stem-cell transplantation procedures. The trial data showed clear and statistically significant improvements from adding Adcetris to existing therapy options, but the differences weren't as large as many had hoped. Without a more clearly compelling reason to make the shift, the worry among investors is that patients and doctors won't tolerate the added cost of Adcetris even if it does win approval from the U.S. Food and Drug Administration.

Arconic shuts down a product line

Finally, Arconic stock dropped 6%. The spun-off value-add aluminum products company from Alcoa chose to stop selling architectural cladding used in high-rise structures following the London fire earlier this month that killed at least 79 people. The confirmation that Arconic products were involved with the disaster at the Grenfell Tower in West London was just the latest in a series of tough situations that the relatively young independent company has dealt with in a short time frame, including the departure of former CEO Klaus Kleinfeld. Given that the sales representative involved in the transaction should have known that the height of the building would generally warrant using available non-combustible cladding instead, investors are correct to fear that Arconic could face hefty fines and other damages as a result of the tragedy.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Seattle Genetics. The Motley Fool has a disclosure policy.

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