Bottom Line: Write off the shares not the company

 
Marc Sidwell
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A FORMER giant, an icon of economic optimism, reduced to embers of its glory within living memory. Not Detroit, but the Yellow Pages.

Yell, as the owner of the business directory was known, was blue chip, a member of the FTSE 100 elite. It was at the nation’s elbow for all the nice and the nasty things in life.

Then it got a nasty shock of its own: the internet. Further weighted down by a £2bn debt pile from an ill-advised acquisition spree, the firm’s standing has been crushed by its encounter with modern technology.

Renamed Hibu a year ago, the firm’s market value has dropped from £5bn to a market cap of around £7m at the end of last week.

Finally, the end is in sight, at least for shareholders. The long expected debt for equity swap will likely slash Hibu’s debt pile by sending shares to zero and placing the company in private hands.

That seems the best chance for this once-mighty company, which still employs 13,000 staff, to make a comeback. It has ambitions to offer web services to small and medium-sized enterprises, a sector facing its own online challenges.

Hibu’s story, like Detroit’s, is a case study in how debt can cripple the apparently invulnerable. But unlike Detroit’s political tragedy, this is simply a tale of corporate bad luck and mismanagement. As such it contains the hope that the market’s dynamism always offers: capitalism’s love of second chances.