Macquarie shares plummet after large dividend cut

The company, which is managed by a U.S. unit of Australia's Macquarie Group, fell $2.09, or 22.5 percent, to close at $7.20. The stock had traded between $8.19 or $41.33 over the last 52-week period.

Jefferies & Co. analyst Pete Rothe lowered Macquarie's rating to "hold" from "buy" and reduced the stock's price target to $9 from $40 citing the company's vulnerability to an economic slowdown.

On Thursday, Macquarie reported a third-quarter profit, but cut its third-quarter dividend to 20 cents per share from 64.5 cents in the second quarter in order to build up cash reserves in the face of a deteriorating economy. It expects to save $20 million.

"Management's decision to significantly reduce the dividend indicates a drastic reversal of strategy and likely points to additional near-term uncertainty at the company," said Davenport & Co. analyst Clint Fendley, in a note to clients.

Based on recent developments, Fendley hesitated recommending investors buy shares of the company, and instead lowered the Macquarie's investment rating to "neutral" due to near-term uncertainty.

"We are expecting this negative outlook to continue heading into fiscal year 2009 as overall business activity, corporate travel in particular, continues to slow," he added.

(This version CORRECTS company's business and relationship with Macquarie Group)