Securities

Oil Spill Hits BP's Stock, Threatens It's Future

  • The Gulf oil spill has caused BP's stock value to fall
  • BP shareholders have filed lawsuits against the company and more may follow
  • With billions of dollars at stake, BP's future may be in jeopardy
  • Take action to protect your property and investments

In the wake of the 2010 oil spill in the Gulf of Mexico, British Petroleum (BP) may face more than having to pay billions of dollars in fines and clean-up costs.

Market Woes

BP's stock value didn't start dropping immediately after the oil rig explosion in April 2010. In fact, for weeks after the explosion there was confidence in BP's ability to weather the storm. Market analysts were recommending that investors buy stock in BP and to hold onto the shares they had. BP's stock was trading at or near it's 52-week high of $62.

That changed, however. By late June, BP was trading in the $27 range. Fewer analysts recommended buying BP and a few recommended that investors sell.

Coincidentally, this was all about the same time as or shortly after BP agreed to put $20 billion into an escrow account to pay for spill-related damages and announced it would not pay stock dividends in 2010.

Reaction

BP's stock market crisis is sparking legal action. First, BP shareholders filed a class action lawsuit in June 2010 in a Louisiana federal court. The suit claims BP violated federal securities laws by making false or misleading statements about safety, technology, inspections, and precautions at its oil drilling facilities, including the Deepwater Horizon rig that exploded in the Gulf.

Shareholder lawsuits like these typically claim the company's misrepresentations caused unreliable inflations in the stock price and/or convinced investors to buy or hold shares, causing them to lose millions when the stock plummeted. If successful, the shareholders' suit could cost BP millions of dollars.

Meanwhile, another shareholder suit is brewing. The State of New York is considering a lawsuit because the state's pension fund, which has investments in BP stock, has lost millions of dollars since the disaster. Likewise, New York City's pension funds have lost millions.

BP's Future

It's uncertain what may happen to BP. As of late June 2010:

  • BP's costs of responding to spill and trying to contain it was $2 billion, and it will continue to go up
  • More than 65,000 claims for real and personal property damage and lost income and profits, and over $100 million has been paid so far. No doubt, more claims will be filed
  • BP's looking at millions of dollars in fines and penalties for violating federal environmental laws

It's possible these and other financial burdens could cripple the company, forcing into bankruptcy.

What You Can Do

If you've been affected by the oil spill, start working on filing a claim for your damages as soon as possible.

If you're a BP stockholder, or thinking about buying or selling BP stock, talk to your financial adviser to help make sure you're making a wise decision. If you're interested in a shareholder lawsuit against BP, talk to an attorney for advice about joining a lawsuit or filing a new one.

The oil spill is, of course, a tragedy. But its damaging effects aren't limited to the Gulf Coast region. It's impacting people and businesses all over the US. Do your best to minimize the damage to your property and wallet.

Questions for Your Attorney

  • Does it cost anything to join a class action lawsuit? How do I join one?
  • Can I file a claim against the $20 billion escrow fund for the loss in value of my BP stock?
  • I don't own BP stock, but my pension fund does. If my pension fund losses money because of BP's stock value and the pension fund administrators don't file a lawsuit, can I file lawsuit against BP on my own? Am I a "shareholder?"

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