Special Situation: Avoid Stelco

Article Excerpt

STELCO HOLDINGS INC. $18 (Toronto symbol STLC) produces hot rolled and other steel products for three main industries: North American auto manufacturing; oil drilling and pipeline; and residential, commercial and industrial construction. On November 3, 2017, the company completed an initial public offering on the Toronto stock exchange at $17.00 a share. It will use the proceeds to help fund the development of new products, production upgrades and other capital investments. The company will also use some of the money to meet its funding obligations for pension and other post-employment benefits. Steel is a highly competitive business, and global capacity remains far higher than current production and demand. That could limit steel price increases. As well, the U.S. Commerce Department continues to study the possibility of imposing import tariffs on steel entering the U.S. That uncertainty, as well as unknowns surrounding the renegotiation of NAFTA, create considerable risk for Stelco. We don’t recommend Stelco. Stelco…