Top 75 public companies
Nearly three years after the credit crisis crippled the economy, businesses are on the mend, as evidenced by the Top 75, Business North Carolina’s annual ranking of the largest publicly traded companies based in the state. But at least one segment is still limping along.
“The banking sector still hasn’t gotten over the financial crisis,” says Neeraj Gupta, assistant professor of finance at Elon University’s Martha and Spencer Love School of Business. “But the rest of the economy seems to be recovering. Larger companies are doing just fine.” He and colleague Anthony Amoruso, an assistant professor of accounting, compiled the list, based on market capitalization at the close of trading June 30.
The median change in market cap on the Top 75 was a 20.2% increase, which is dramatic considering that the giant who dominates the list — Charlotte-based Bank of America Corp. — saw its value plummet 23%, a loss of $33 billion. That’s more than the total market cap of the No. 2 company, Mooresville-based hardware retailer Lowe’s Cos. Overall growth, however, was one reason the cutoff point to make this year’s list jumped from $39 million in 2010 to $55.3 million. Then again, last year’s ranking was compiled after the stock market took one of its periodic plunges, falling more than 15% in less than 10 weeks and relinquishing six months’ worth of gains. There was talk about a double-dip recession, but despite the continuing drag of high unemployment, the stock market zigzagged its way higher, with the S&P 500 up 28% from its close on June 30, 2010. Fifty-one companies improved their market caps, the same number as last year.
But for BofA, the hits just keep on coming: Its shares closed at $9.57, a 52-week low, on July 19 after the company announced a record $8.8 billion loss in the second quarter. Tack on the wrath of 50 state attorneys general in the guise of a lawsuit over mortgage practices, and some wonder if the bank can remain intact.
“Is the company worth more separately than collectively?” asks Tony Plath, an associate professor of finance at UNC Charlotte. “That depends on how much capital they’ve got to raise to see their way to the end of the mortgage crisis. But they haven’t hit a number in two years that they said they were going to hit. That makes you question their credibility.” During a phone conference with analysts July 19, CEO Brian Moynihan rejected the notion that BofA would have to raise capital.
The financial industry’s woes are magnified on the Top 75 by many of the state’s big banks. Market cap of Winston-Salem-based BB&T Corp. grew only 2.7%, which dropped it from fourth to fifth place on this year’s list, trading places with its Twin City neighbor, Reynolds American Inc. The tobacco company’s value skyrocketed 42.2%. Raleigh-based First Citizens Bancshares Inc. slid from 23rd to 29th as its market cap shrank 2.7%. Survival meant sacrifice for some, including No. 48, Capital Bank Corp. The Raleigh-based bank increased its value more than any other company on the list, by roughly 615%, from about $41 million to about $299 million, but it did so largely by selling 71 million new shares to Charlotte-based North American Financial Holdings Inc. (page 32). Four financial-services companies that were already at the bottom of 2010’s list were knocked off this year’s. But improvement is on the horizon.
“We’re still likely to lose more than a few banks to failure and consolidation transactions in North Carolina, but these losses will be limited to the weaker institutions in the state,” Plath says. “The stronger banks, in contrast, can look forward to better performance and at least a marginally better business climate in 2012.”
To see the full list, order a copy of the August 2011 issue here. 10-packs are also available!