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Our law firm is investigating potential claims on behalf of current and former FedEx employees who held concentrated positions in FedEx stock on margin with full-service brokerage firms. On February 26, 2007, FedEx stock was trading at $121 per share. However, over the next two years, the price of the stock declined over 72%, closing at $34 per share on March 9, 2009. As a result, many FedEx shareholders who used their FedEx stock as collateral for margin loans most likely received a margin call, and a substantial portion of their stock was liquidated.
Unfortunately, many former and current FedEx employees who held concentrated positions in FedEx stock were never advised by their full-service brokerage firm of the risks associated with owning a concentrated account. Additionally, many firms failed to explain how the use of risk management strategies, like a zero-cost collar, protective put options, stop loss orders and/or an exchange fund, could have been utilized to protect the concentrated FedEx stock positions.
The effects of margin on a concentrated position substantially increases the risk to a concentrated account, and can lead to the forced liquidation of the stock which precludes the investor from recovering their losses through a potential rebound in the price of the stock. If margin had not been used in a concentrated FedEx account, the FedEx stock would not have been liquidated to meet the margin call, thereby providing it with an opportunity to recover given that the price of FedEx stock came back in value since 2009. However, with the forced sale of the stock, the liquidated FedEx stock no longer has the ability to recover.