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Doral Financial Wins Appellate Case, Shares Skyrocket

  +Follow July 2, 2014 11:54AM
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small-cap stocks, small-cap stars, stocks to buy now, Doral Financial stock

On July 2 Doral Financial (DRL) saw shares surge more than 70 percent at one point before backing off slightly on a decisive court victory over the government of Puerto Rico.

In a statement to stockholders, Doral claimed an appellate court had overturned an earlier ruling that favored Puerto Rico in the ongoing war over a whopping $230 million in tax refunds Doral claims they are still owed. The Puerto Rican government has tried to nullify this repayment, and Doral’s challenge had been previously thrown out by a lower court over jurisdiction issues.

Doral In Dire Straits

While $230 million in tax refunds is welcomed by any company, the cash-strapped Doral is in especial need of the funds. The lender has struggled to maintain a sufficient amount of Tier 1 capital as required by banks in the wake of the 2008 financial meltdown. An accounting discrepancy of Doral’s, in which the lender was cited for using inappropriate assets in their capital requirements, exacerbated the bank’s shortfall.

Doral has claimed that if push comes to shove they can sell assets to meet their requirements. But that is a scenario the company’s beleaguered stockholders would definitely not like to see.  

In an effort to shore up their reserves while satiating their shareholder’s interests, Doral has been aggressive in their quest for the $230 million in total they feel they are owed. Unsurprisingly, San Juan has been loath to pay the money back, and has repeatedly tried to stonewall them through a lengthy court battle.

As the battle has see-sawed between Doral and the Puerto Rican government’s favor, so has Doral’s stock.  Shares of the lender have whipsawed. Shares went from $3 to $5 a share from June 3 to June 10 on the heels of a major victory in the Puerto Rico Supreme Court. After the bounce though, shares plummeted near the $4 range, but then popped again on the July 2 ruling to above $6.50. Even after the recovery, the company’s stock is still down 60 percent in 2014.

A Deeper Look at Doral

 Despite their woes, as an investment Doral still maintains some promising fundamentals. According to the equities.com EVA reports, Doral’s Net Margin is much higher than the industry average, which ia a very positive sign for the company. Doral’s return on equity (ROE) is also higher than average, indicating that the company is not overleveraged in comparison to its peers.

For the near-term future however, investors will be looking less at fundamentals and more at the decisions made by the Puerto Rican courts. If their home government is indeed on the hook for such a massive repayment, Doral’s shares will be sure to skyrocket.

Of course, the reverse is true, and if Doral does not reclaim the taxes they claim they overpaid, they will be forced to liquidate assets, and the company’s stockholders will be in store for some pretty significant losses.

By 3 PM EST shares of Doral were trading at $6.46 a share, representing a gain of 60.3% on the day.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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22 Oct 14 14:02:13
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22 Oct 14 12:59:10
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21 Oct 14 14:00:18
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PhilCheeze
21 Oct 14 12:08:44
RT @attivacapital: S&P : "If Puerto Rico loses the case ...a $45 million per year payout over five years -- would remain relatively small .…
PhilCheeze
21 Oct 14 12:08:40
RT @attivacapital: S&P: Puerto Rico Rating Unchanged On Doral $DRL Court Ruling
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21 Oct 14 11:23:17
S&P: Puerto Rico Rating Unchanged On Doral $DRL Court Ruling
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21 Oct 14 11:22:21
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Charlie Pryor
20 Oct 14 21:47:13
Looking for $RBCN $DRL and $VSR to all make some positive movements on news this week, perhaps. All unrelated stocks with great potential.
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20 Oct 14 14:01:01
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20 Oct 14 14:00:03
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20 Oct 14 13:03:14
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20 Oct 14 12:00:03
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20 Oct 14 11:56:56
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Instaya
20 Oct 14 11:49:44
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20 Oct 14 11:47:21
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20 Oct 14 11:45:39
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20 Oct 14 11:44:44
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20 Oct 14 11:06:13
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20 Oct 14 11:02:49
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Instaya
20 Oct 14 10:14:33
UBS Recommends That Brokers Continue To Offer Risky Puerto Rico Funds http://t.co/2esdLok5Wz $DRL
PhilCheeze
20 Oct 14 10:04:25
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20 Oct 14 08:30:08
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20 Oct 14 07:28:35
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20 Oct 14 07:28:03
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20 Oct 14 07:06:57
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PhilCheeze
20 Oct 14 07:04:26
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20 Oct 14 06:48:08
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20 Oct 14 06:45:19
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PhilCheeze
20 Oct 14 05:25:35
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PhilCheeze
20 Oct 14 05:25:29
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Instaya
19 Oct 14 22:28:23
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19 Oct 14 22:27:25
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Instaya
19 Oct 14 22:26:47
RT @jjaasszz: $DRL with $1 billion in liquid after assets sale + court ruling, Monday could trigger squeeze. MC only $36 mil?? http://t.co/…
PR Guru
19 Oct 14 19:56:40
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Steven Banks
19 Oct 14 18:18:29
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19 Oct 14 11:56:03
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Jersey Drew
18 Oct 14 19:31:25
RT @jjaasszz: $DRL with $1 billion in liquid after assets sale + court ruling, Monday could trigger squeeze. MC only $36 mil?? http://t.co/…
Calm trader
18 Oct 14 19:08:29
$DRL with $1 billion in liquid after assets sale + court ruling, Monday could trigger squeeze. MC only $36 mil?? http://t.co/FKTHDo9RD5
InvestorDaily
18 Oct 14 05:05:29
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  +Follow July 2, 2014 11:54AM
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