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Leigh Baldwin & Co.

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Diamonds and Dogs

6/4/12

Delta Airlines Inc. (DAL)

Delta Airlines dropped in altitude today, down 11.56% at $10.18. Delta saw their stock crash and burn after releasing that the company intends to use add-on fees to generate income. The add-on fees will be extra fees for snacks, certain seats, and internet on the plane. Atlanta-based Delta is following the lead of discount airlines like Spirit Airlines with add-on fees to help increase revenue. Investors seem to be worried that these add-on fees show a weakness in Delta's income. Adding to the fear; Delta also released that they were planning on spending $65 million to gain a four percent stake in Grupo Aeromexico, Mexico's largest airliner. The Mexican Federal Competition Commission (CFC) authorized Delta Air Lines to underwrite and purchase 30,182,855 shares of the stock by paying 31 Mexican pesos per share. Delta looks as though it needs to raise income, yet spends $65 million. This mix appears to trouble investors, and the proof can be seen in the stock's movement today.

Credo Petroleum Corp. (CRED)

Credo Petroleum exploded today, up 32.14% at $14.35. The company saw a bounce after news was released that Forestar Group Inc. was going to buy Credo. Forestar Group Inc., a real estate and natural resources developer, agreed to buy Credo for about $146 million in cash. Under the terms of the agreement, Forestar will pay $14.50 per share for the Denver-based oil and gas company. That is a 34 percent premium over the company's Friday closing stock price of $10.86. Forestar said the acquisition is expected to more than double its existing oil and gas production and proven reserves. Once the deal closes, the company will have significant ownership and operations in several strategic oil and gas formations including North Dakota's Bakken and Three Forks formations. Credo Petroleum did very well today, beating its previous 52-week high of $11.86 by almost 3 dollars.
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