Pennzoil Co. stock gyrated wildly yesterday amid rumors and speculation about a settlement of its $11.1 billion legal battle with Texaco.
By day's end, there was no deal in sight. And Pennzoil shares, which soared to $91, dropped back to $74.50, about where they had started yesterday -- but not before 1.8 million shares changed hands.
The roller-coaster action in Pennzoil stock offered traders an unusual opportunity for instant profits or losses in both the stock and options.
A speculator could have bought an option on 100 shares of Pennzoil stock for $37.50 on Monday and sold it for $1,025 at the close of trading Tuesday. That same option bought for $1,025 Tuesday could have been sold early yesterday for only $300, according to The Associated Press. At the end of the day, however, the option was worth $400 after soaring as high as $1,100 during hectic trading.
The option gave the holder the right, but not the obligation, to buy 100 shares of Pennzoil stock for $75 a share on Jan. 17.
Shortly after noon yesterday, the action in Pennzoil shares grew so feverish that trading in the oil stock was halted by New York Stock Exchange officials for two hours because of an imbalance of orders. At one point, a floor observer said, 60 impassioned traders were jammed around the Pennzoil post, all trying to take part in the torrent of buying and selling.
"It was a real zoo out there today," said the observer, who declined to be named.
Pennzoil Chairman J. Hugh Liedtke said he had asked the Securities and Exchange Commission, the National Association of Securities Dealers and the NYSE to investigate "the apparently manipulative trading in Pennzoil common stock based on false rumors."
Pennzoil also requested that the regulators specifically investigate "whether Texaco or anyone acting in concert with Texaco or at its behest was responsible for creating the circumstances" surrounding the trading.
A Texaco spokesman said the company "strongly rejects and resents the suggestion [by Pennzoil] that Texaco or anyone authorized by it was responsible for any action relating to Pennzoil stock trading."
A NYSE spokesman said their investigation already was under way.
Yesterday was the second straight day that Pennzoil had seen its stock and its options caught up in speculative fever. As the rumors circulated, each one seemed to produce a different scenario as to how Pennzoil might settle its pending legal judgment against Texaco and what that would be worth in dollars to Pennzoil shareholders.
Kidder, Peabody, for instance, told its clients yesterday to sell Pennzoil after concluding that the most likely event was a sale of Texaco oil to Pennzoil at a discount that could bring the value of Pennzoil stock to $75. At that point, it appeared that Pennzoil stock was heading lower.
Tuesday's trading, fed by reports that Texaco had made a rich offer to Pennzoil, took the stock from $63.25 to $83, an extraordinary $19.75 rise on 1.1 million shares. After Pennzoil announced Tuesday night it rejected the offer, without saying what it was, the stock opened yesterday at $75, down $8 at the opening, which was delayed 30 minutes. But later reports that Texaco had offered a merger-style plan worth about $90 a share to Pennzoil helped keep the speculation alive.
By the time trading was halted at 12:14 p.m., Pennzoil had sold as high as $91. In fact, between 11:57 a.m. and 12:08 p.m., a span of 11 minutes, records at Salomon Brothers showed that the stock moved from $83.75 to $91, a gain of $7.25. When the halt came, Pennzoil was back to $89 and when it reopened for trading at 2:13 p.m., it came back at $78. After that it continued to drift down until it closed at $74.50.
Texaco stock, meanwhile, dropped 50 cents a share on Tuesday and another 37.5 cents yesterday to close at $30.375.