DONNKENNY STOCK FALLS 40 PERCENT

NEW YORK — The collapse of Donnkenny Inc.’s stock accelerated Monday; shares fell 2 7/8 — or 40 percent — to 4 3/16, following the report late Friday that 1996 earnings would be “significantly below” Wall Street estimates.
Trading volume was overwhelming; 8.3 million shares exchanged hands in over-the-counter trading. Average daily volume is about 290,000.
Prudential Securities Monday cut its rating on the stock to sell from buy, following a similar downgrade late Friday by Dillon Read & Co., to underperform from buy.
Prudential had upgraded the stock to buy Nov. 8, after receiving assurances from Richard Rubin, Donnkenny’s chief executive officer, that the company was comfortable with Wall Street’s full-year earnings estimates of $1.30 to $1.40 a share.
However, late last Friday, Donnkenny said earnings this year would fall sharply below Street estimates and released third-quarter earnings of 33 cents a share, far short of average estimates of 49 cents.
Besides disappointing earnings, shares of Donnkenny have been hit over the last two weeks by news of possible accounting irregularities and a lawsuit alleging insider trading.
The stock, which has a 52-week high of 21 3/8, took its first recent hit Nov. 7; it dropped 3 5/8 to 8 7/8 that day, following disclosure that the firm’s auditing committee and independent counsel were investigating financial statements.

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