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shareholders selling out reports are ‘groundless’ says Fiat

Fiat said that Italian media reports about a significant number of its shareholders having exercised their exit rights, a move that could potentially jeopardize the carmaker’s merger with its U.S. unit Chrysler, were unfounded.

“These rumors are groundless,” the company said in a statement today. “The term for the exercise of the cash exit rights has begun today and Fiat has not received any notices of exercise of the cash exit rights.”

Shareholders at a special meeting on Aug. 1 approved the merger of Fiat with Chrysler to create a new entity, Fiat Chrysler Automobiles NV, based in London and with its main stock trading in New York.

Technically the merger could still fail if around 5 percent of all shareholders exercise their rights to sell out, a possibility that analysts and management consider remote. Investors who wish to exit the company will be paid €7.727 a share

CEO Sergio Marchionne said before the Aug. 1 meeting that buyout costs exceeding €500 million may make the deal ineffective.

George Galliers, an analyst at International Strategy & Investment in London, said: “We believe the selloff is based on a misunderstanding regarding the merger,” including an assumption that all investors opposing the transaction will seek a buyout and put the cost cap in range.

“Just because a voter has voted against the merger, it does not mean that they will execute their cash exit rights,” he said.

Fiat stock fell more than 4 percent to a seven-month low on Tuesday, partially because of concerns over the merger, but also due to a press report in Chinese media regarding a competition probe targeting Chrysler and other Western automakers in China.