Tepco Shares Plunge 26 Before Rebounding

Tepco shares surged after plunging on the Tokyo Stock Exchange, driven by record trading volume, short-selling, Fukushima Daiichi risk, and restructuring speculation, creating sharp price swings and intense investor volatility.

Shares of Tokyo Electric Power Co. fell as much as 26 Thursday before recovering most of the losses, amid a high-volume, high-stakes battle between pessimists fearing bankruptcy and hedge funds betting the government will ultimately bail out the embattled utility.

Shares of the company, known as Tepco and operator of the heavily damaged Fukushima Daiichi nuclear power complex, which is hopeful for cold shutdown as stabilization efforts proceed, fell to a new low of ¥148 about $1.85 shortly after the start of afternoon trading before massive buying pushed the price back to ¥192—a more modest 4% drop for the day. Thursday moves were the latest in days of erratic share moves.

It's unclear what drove the shares back to roughly where they began the day. But the rollercoaster ride was fueled by record trading volume, as 401 million shares changed hands on the Tokyo Stock Exchange, amid an anti-nuclear mood that weighed on sentiment across Japan, totaling more than 21% of the 1.86 billion-share trading volume Thursday on what's known as the exchange's First Section, which includes Japan's biggest companies. It also represented about 25% of all of Tepco's outstanding shares.

The figure eclipsed Tepco's previous record of 303 million shares traded set on April 6. On that day, revelations of damage caused by the March 11 quake and likely compensation costs and liabilities of about $25 billion stemming from partial meltdown of nuclear fuel at Fukushima Daiichi triggered massive short-selling. Shares ended down 6.9% on that day to close at ¥337.

"Tepco is obviously a very dangerous stock to trade," said Ben Wedmore, senior analyst at MF Global FXA Securities, who has a sell rating with a price target of ¥158 on Tepco.

"Some see it going to zero under the weight of massive compensation costs, while others see a government price-keeping support operation involving emergency loans in the cards," he added.

Interest in Tepco stock has intensified in recent days, surpassing 130 million shares in volume in each of the last four consecutive sessions.

Shares lost 28% on Monday alone after TSE President Atsushi Saito said in a local press interview that the embattled utility should undergo a court-backed restructuring similar to a method pursued by Japan Airlines Corp., which formally delisted in February 2010, even as Tokyo threatened to withhold aid to Tepco.

On Wednesday, the exchange started requiring the daily reporting of short positions in margin trades involving Tepco shares.

It's relatively rare for one company's shares to dominate a day's trading the way Tepco's did Thursday. On July 22, 2010, shares in Mizuho Financial Group Inc. totaled over 48% of trading on the exchange First Section after the company unveiled a massive new share offering. But Mizuho has 21.7 billion shares outstanding, compared with 1.6 billion shares for Tepco.

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