NEW YORK – Two top executives of Tyco International Ltd. said they will buy 1 million shares of the acquisitive conglomerate, helping to stop the recent downward spiral of its stock.
The shares have plunged to two-year lows due to rumors and skepticism about the company's accounting practices and its plan to split into four parts,.
Shares were off as much as 18 percent earlier in the day as the market was further agitated by a Wednesday article in The New York Times that said Chief Executive L. Dennis Kozlowski and Chief Financial Officer Mark Swartz disposed of $100 million of Tyco's stock in the company's last fiscal year.
But at midday Tyco said in a statement that Kozlowski and Swartz would each buy 500,000 shares of the company, or $30 million worth. The stock recovered to close on the New York Stock Exchange at $34.85, up $1.20, or 3.6 percent.
``That's a pretty big confidence boost,'' said Morningstar analyst Rob Plaza. The announcement could help stave off some comparisons of Tyco to collapsed energy trader Enron Corp., he said.
After the Enron bankruptcy filing, investors have focused on any companies with complex accounting. This led them to Tyco, which the Securities and Exchange Commission has investigated in the past for its accounting, although no action was taken.
Top executives at Enron have been highly criticized for touting the company's stock while selling their own shares. Tyco's statement on Wednesday disclosing Kozlowski and Swartz's purchase of Tyco shares would be a departure from this.
``That's the best thing to do to restore trust,'' Plaza said. ''Put your money where your mouth is.''
Tyco stock is now down nearly 41 percent from its Dec. 31 close of $58.90 and ended Wednesday trading at its lowest level since January 2000.
Tyco was the third most active stock in a single day in NYSE history, with the first two slots belonging to Enron. More 151 million Tyco shares changed hands on Wednesday, traded as of the late afternoon, accounting for about 7.6 percent of Big Board volume.
The company's bond price was hurt on Wednesday, with its benchmark 6.75 percent notes maturing in 2011 to about 91 cents in the midafternoon, down 13 cents since Tyco announced plans on Jan. 22 to get rid of at least $11 billion of debt as part of its split.
The notes were bid on Wednesday to yield about 8.2 percent, or 3.2 percentage points more than 10-year U.S. Treasuries, up from a 2.70 percentage point yield premium on Tuesday.
Tyco is the 10th-largest U.S. issuer of corporate bonds, with about $20.7 billion outstanding as of Dec. 31, according to Lehman Brothers Inc.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox