Tom Reese/Paul Rubillo, Dividend.com
XL Capital (XL) is rallying today, after the company reported that Chairman Brian O'Hara involuntarily sold about 80% of his XL common shares on October 9th in order to meet a margin loan call.
Similar to Chesapeake Energy's reaction yesterday on news of their CEO being forced to meet margin calls, investors are piling into shares on hopes of a quick rebound.
The company also disclosed that it expects to report a third quarter loss of $1.65 billion to $1.67 billion, or $6.08 to $6.17 per share, compared to a profit of $328 million, or $1.82 a share in the year-ago period.
The Bottom Line
We're not sure why investors seemingly want to want to pile in to the shares of XL today, but the stock is having another up day, last we checked. We're concerned about the health of XL's overall business, considering a lot of the top brass are being forced into meeting margin calls. Clearly, holding big chunks of stock as the price continues to tank is an ill-advised move, to say the least.
We hope the company and management focus on the day-to-day operations, and not the distraction of margin calls and the stock price dropping. We would be cautious on the shares until we see the stock's price stabilize a bit.
XL Capital (XL) is not recommended at this time, holding a Dividend.com Rating of 2.7 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.
