08/01/2002 11:00PM

Magna stock plummets after revised analyses


NEW YORK - Shares in Magna Entertainment plunged 21 percent to a 52-week low on Friday after two analysts downgraded the company's stock following a disappointing second-quarter earnings announcement Thursday.

Shares in Magna, the racing company headed by Frank Stronach, closed at $4.01, down $1.04. Trading was extraordinarily heavy at 2 million shares, six times the average volume.

Analysts at CIBC World Markets and Bear Stearns downgraded their ratings on Magna stock on Friday morning, one day after Magna officials said that the company was going to focus on making its individual tracks profitable while putting off any more acquisitions. Magna had earnings of $1.1 million in the quarter, or one cent per share, missing analysts' estimate of 3 cents per share.

Bear Stearns, which downgraded the stock from buy to neutral, underwrote Magna's stock offering in April. On Friday, the lead gambling analyst at Bear Sterns, Jason Ader, issued a research report that said "the outlook for Magna has become increasingly uncertain."

Magna is the largest racetrack operator in the United States. It currently owns 10 tracks, including Gulfstream Park in south Florida and Santa Anita Park in Southern California, and has deals pending to buy stakes in four others.

Michael Tew, another analyst for Bear Stearns, said in an interview that the company's downgrade was a cautionary move.

"There's still a lot of inherent value in the company, that the company has already created with its acquisitions, and the long-term outlook is still positive," Tew said. "But we'd like to see management execute the business plan in the near-term before we'll take any more action."

David Rocker, a New York hedge fund manager, filed papers with the Securities and Exchange Commission on Wednesday declaring that he had bought 2.34 million shares in the company, or 5 percent of the stock.

Rocker and his company, Rocker Partners, specialize in short sales, or bets that stocks will go down. Efforts to reach Rocker on Friday were unsuccessful.

Graham Orr, Magna's chief financial officer, said in an interview Thursday that company officials had met with Rocker in April before the recent stock offering. Orr said he did not know Rocker's intentions, but that he "wasn't surprised to see [Rocker] take a big position."