RadioShack Corp. (RSH) Underperform Rating Maintained at Wedbush

Wedbush maintained an Underperform rating on RadioShack Corp. (NYSE: RSH) with a price target of $0.00. Comments follow its debt restructuring agreement. Analyst Michael Pachter continues to thinks creditors will force a reorganization and wipe out RadioShack’s equity.

"We believe that the new financing reflects a current value for RadioShack shares of $0.40, and believe that if exercised, the conversion would trigger further dilution. Given that the rights offering is intended to provide existing shareholders the option to buy shares at the same price as the new creditors are able to convert, we believe it implies that the new creditors value the company at $0.40/share or lower," said Pachter.

"The $120 million investment, once converted at $0.40, will result in 300 million additional shares, meaning that the existing shareholders will own approximately 25% of the equity once the conversion is complete. Additionally, holders of the existing 100 million in outstanding shares will also have rights to conversion at $0.40 on a one-for-one basis, which will result in a total of 500 million total shares outstanding; even if the equity were valued at $260 million ($120 million of converted debt, $100 million current market capitalization, plus $40 million of incremental proceeds from the rights offering), RadioShack’s total equity would reflect a share price of approximately $0.50," he added.

For an analyst ratings summary and ratings history on RadioShack Corp. click here. For more ratings news on RadioShack Corp. click here.

Shares of RadioShack Corp. closed at $0.99 yesterday.

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