New York-based investment firm Maxim Group LLC initiated coverage of the stock of Memphis-based Pinnacle Airlines Corp. on Monday with a “sell” rating, and in a note to clients said the company has a “high probability” of ending up in bankruptcy.
Also Monday, Pinnacle confirmed that it could furlough as many as 154 employees in its PinnPro ground operations unit at Memphis International Airport.
Maxim analyst Ray Neidl wrote in a note to clients Monday that “we do not see any indicator of a significant turnaround” over the next year for Pinnacle and that the company may even run out of cash first.
Pinnacle’s stock dropped 11 percent early Monday and was below $1 for most of the morning when news of the Maxim coverage and report began circulating.
The company said the number of furloughs (which includes 18 full-time and 136 part-time employees) could be lower depending on attrition between now and Jan. 4.
Jan. 4 is when a new flight schedule begins that includes a reduction in Delta Air Lines Inc. flights out of Memphis. Pinnacle flies regional and commuter flights for Delta and other carriers.
The price drop in Pinnacle stock has continued since last week, with the departure of another executive – Pinnacle senior vice president of operations Robert Muhs – and a Dec. 8 announcement by Pinnacle CEO Sean Menke.
Menke said the company has hired a law firm and consultants to “commence a comprehensive program to reduce short- and long-term costs and enhance liquidity.”
“These efforts are necessary to ensure we can operate as a profitable business for our shareholders, mainline flying partners, employees and other stakeholders,” read the written statement from Menke.
Analysts at Dahlman Rose & Co. LLC earlier this month dropped their rating on the Pinnacle stock from “hold” to “sell.” A Dahlman Rose note to investors predicted continued losses through the first half of 2012.
“The company has had operational issues this year,” the note read. “We believe it will have to restructure its operations and balance sheet and it is possible the only way may be through the courts.”
Pinnacle Corp. moved into One Commerce Square this year as the new anchor tenant of the building that is part of the Downtown Memphis skyline.