'Worthless' shares fear for Marconi

SHARES in Marconi are expected to plunge still further this week as crucial restructuring talks enter their final stages.

Banks and bondholders are owed more than £4 billion and are in talks to swap their debt for shares in a move that will massively dilute existing shareholder equity, as Financial Mail revealed in May.

Reports last week that shareholders could end up with just 1% of the restructured company sent Marconi's share price plunging 30% lower on Friday to 2.52p.

But John Walter, an analyst with independent research firm Equity Investigator, said even this was optimistic. He argued that shares are likely to fall even lower, cutting the value of the existing shareholders' stake to almost nothing. He warned: 'You could make a case for the shares being worth just 0.1p each for existing shareholders.'

Marconi said on Friday that restructuring talks were continuing. Sources close to the negotiations suggested an agreement could come this week.

The alternative to restructuring would be administration. Marconi chairman Derek Bonham is thought to have ruled out a bid approach for the business earlier this year.

If a debt-swap agreement is reached it will lead to the creation of a new Marconi company, which will issue shares to banks and bondholders and swap existing investors' shares.

Despite owning the vast majority of the new company, banks and bondholders are not expected to be forced to hold on to their shares for an agreed period, but will be free to sell them. And that is likely to lead to continued volatility in the share price.