Investors fled Marconi in droves again today because of worries about the uncertain future for the British telecoms equipment maker following last week's near collapse of refinancing talks.
Marconi said on Friday it had failed to reach a deal with banks over billions of euros of debt and would, therefore, hammer out a revised business plan over the next few weeks in order to cope with a depressed market for telecoms equipment.
Analysts raised fears today of a potential debt-for-equity swap and the severe dilution of value that implies, driving shares 34.55 per cent lower to a record 6.57 pence as a market-leading almost 310 million shares changed hands.
The stock had already nearly halved in value on Friday on a staggering volume of 735 million shares.
The decline meant the former blue chip, and a defence industry leader before selling those interests to focus on telecoms, may even face relegation from the mid-sized FTSE 250 index.
"It is a waste of time to hold shares in Marconi. If you are an institution you should have got out some time ago," one London dealer said. "This is a penny stock now."
Investment bank UBS Warburg dropped its share price target to five pence from 30p, and Morgan Stanley cut its recommendation on the stock to "underweight" from "equal-weight". The shares have already lost 99 per cent of their value since January 2001.
On the debt market, Marconi bonds fell amid lingering concern about a default, despite a strong denial from the firm.
Marconi has been gripped by financial doubts since the telecoms equipment market entered an unforeseen slump. The group has spent the last six months trying to restructure its finances and reduce its debt, selling businesses and laying off staff.
Analysts said that in addition to the potential equity dilution, Marconi may have to suffer through even more pressure on demand for its products as telecoms operators make further cuts in capital expenditure.
A British Sunday newspaper had reported that Marconi was about to default on £56.7 million of interest payments on its euro-denominated bonds. The bonds extended Friday's sharp falls despite reassurances from Marconi.
Credit rating agency Standard and Poor's cut the ratings on Marconi debt on Friday ahead of an expected restructuring, because the lending banks wielded so much control.
"There is a high probability that the group's balance sheet will be restructured on terms that are detrimental to bondholders," S&P said in a statement.
Market conditions had deteriorated and were likely to last longer than had been expected, it added.