BOSTON (CBS.MW) -- On Tuesday, March 7, Procter & Gamble's CEO announced that third-quarter and fiscal year earnings would fall considerably short of expectations. The news set off a brutal wholesale dumping of the company's shares, driving the stock price down by more than 30 percent. In one day, the volume of shares changing hands was 13 times the average, and over $35 billion in P&G market value evaporated.
There are lingering questions as to why the market reacted so viciously towards the Cincinnati-based maker of venerated brands such as household products Tide laundry detergent and Crest toothpaste.
But one thing is certain: Procter & Gamble retirement plan participants were taken to the cleaners. According to Hewitt Associates, more than 95 percent of P&G's profit sharing and defined contribution retirement plan assets were invested in Procter & Gamble stock (PG: news, msgs).
That’s a hard pill to swallow for plan participants. Some say we shouldn't be too sympathetic, because P&G employees have enjoyed solid gains in the company's stock for several years. Also, employees chose to invest their savings in their company’s stock, right?
Not exactly. Many employer plans use their stock to fund retirement plan obligations such as profit sharing and 401(k) plan matching contributions. Not only do some companies make contributions in the form of company stock, they also restrict employees from selling shares until they are age 55 with over 10 years of service.
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http://cbs.marketwatch.com/archive/20000315/news/current/martin.htx?dist=nwtpm
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/ dave /