Friday, May 18, 2007

Run-up runs course; DCX shares peak

May 18, 2007

After a tremendous run-up, shares of DaimlerChrysler AG appeared to peak Thursday, as investors have decided that selling off Chrysler was fun, but now it's time to cash out and sell those shares.

Just three months ago, on Feb. 13, the day before DaimlerChrysler AG first hinted the Chrysler Group might be sold, the stock opened at $63.94.

Now that a deal has been announced for private equity firm Cerberus Capital Management to acquire Chrysler, DaimlerChrysler's shares are going for more than $86 -- a 34% increase in just three months.

Kevin Tynan, an analyst with Argus Research, advised his clients to sell now.

"With the German faction of DCX finally casting off the unwanted Chrysler Group, the current price of the shares should encourage investors to take profits and have a good laugh all the way to the bank," he said in a note Thursday.

It appears that the market agreed: After rising 9.7% from last Thursday through Wednesday, DaimlerChrysler shares slipped 66 cents, or 0.8%, Thursday to $86.02.

The sale of Chrysler is a deal that German shareholders demanded for some time. In Germany, it's being called "Daimler's $27.5-billion lesson" -- a reference to the fact that Daimler-Benz AG spent about $36 billion to acquire the Chrysler Corp. in 1998.

Zetsche says Chrysler contributed $11 billion to the company over the past nine years. Through the deal, Daimler will be getting rid of $17.5 billion in estimated health care liabilities for Chrysler workers.

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