WR Grace Bets the Farm; Profit-Hungry Speculators Stand By

W. R. Grace is a name that will live in infamy when it comes to asbestos injuries. It is well known that their Libby, Montana, operation and the product which was mined from the surrounding mountains was responsible for the misery and death of thousands of human beings–human beings who had dreams and families, who laughed, cried, loved, and ultimately died one of the most excruciatingly painful deaths imaginable, fighting for every breath of air.

Meanwhile, in actions that are at best opportunistic, some investors are now betting that this most egregious producer of deadly asbestos materials will be let off the hook, and that they can make a windfall profit as a result.

Currently, W.R. Grace–now in Chapter 11 bankruptcy and under federal indictment for conspiracy to conceal information about the health risks of asbestos–is preparing to gamble on the decision of a single U.S. bankruptcy judge in the corporate-friendly state of Delaware. On 14 January, Judge Judith Fitzgerald, who also presided over the AC and C bankruptcy proceedings, began hearing arguments regarding the amount of the corporation’s liability, which asbestos experts estimate at nearly $4 billion.

Despite the fact that W.R. Grace has been in bankruptcy for six years, its stock has sold for as much as $32.80 per share in the last year, and was trading at around $22 per share when the trial started. Some investors have been grabbing it up, betting that Judge Fitzgerald will go easy on the company and that “phony claims” and “junk science” will be exposed. Should she limit the corporation’s liability to no more than $700 million, Grace will survive, and shareholders could profit handsomely if its stock recovers.

If justice is served, however, Judge Fitzgerald will come to the same conclusion as the experts–which will be tantamount to a richly-deserved corporate death sentence for W. R. Grace and Co.

It won’t be all bad for the investors, however. After all, such losses can always be claimed on their 2009 tax returns…

Source

Brickley, Peg. “Grace Trial to Test Asbestos Claims.” Forbes, 03 January 2008.

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