Why Mechel OAO (ADR) Dropped 31% Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of Russian mining company Mechel OAO (ADR) fell as much as 31% today after it became apparent the company would go bankrupt.

So what: Russian Economic Minister Alexei Ulyukayev said that bankruptcy was "inevitable" for the mining giant after talks to restructure $6 billion in debt failed. U.S. sanctions, a falling ruble, high debt, and a weak commodity environment have all contributed to Mechel's worsening financial position and it now seems to be too much for the company to overcome.

Now what: It's been a volatile year for Mechel as the company teetered on the verge of bankruptcy and even today there's no guarantee bankruptcy is certain. But if Russia's own internal economics minister doesn't see a future in Mechel's current capital structure you know things are bad. I don't see any reason to buy shares today because betting on either a rise or fall in the stock is just a gamble at this point.

The article Why Mechel OAO (ADR) Dropped 31% Today originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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