Unistar Blames Illegal Short-Sellers for 27% Stock Decline
Dallas, July 15 (Bloomberg) -- Unistar Financial Service Corp. blamed ''malicious'' and illegal sales by rivals for a 27 percent decline in its shares.
Stock of the insurance agency company declined 14 7/8 to a two-month low of 41 1/16. The American Stock Exchange halted trading for 4 1/2 hours. Including a 6.8 percent drop in the stock yesterday, the company lost almost one-third of its market value, or about $440 million, in two days. ''There's just no reason for this malicious attack we've had in the last two days,'' chairman and chief executive Marc A. Sparks said.
Sparks blamed the plunge on a ''handful of illegal short- sellers,'' or investors who sell borrowed shares and would profit if the price falls. Such sales may be illegal in Unistar's case because they involve so-called restricted stock issued subject to certain conditions, Sparks said.
About 95 percent of sales in recent days involve borrowed shares, Sparks said, citing information from the exchange. An exchange spokesman declined to comment on whether short-selling accounted for most of the Unistar shares sold in recent days.
The Dallas-based company is ''using every bit of available regulatory investigation'' to find out who's behind the sales, Sparks said. ''Our advisers on Wall Street are very concerned.''
Even so, the Dallas-based company's shares are trading at about twice their January low. ''We're completely on track with our business plan,'' Sparks said, adding that the company's business is growing at a 100 percent annual clip.
Unistar buys small agencies that sell automobile and other personal property-and-casualty insurance. It earns commissions from the business in its 160 stores. It shifts the insurance liabilities and premium earnings to other insurers. ''We're a commission financial service business,'' Sparks said. ''Life up until yesterday has been very good.''
Through yesterday, Unistar was the best-performer among U.S. insurers with a market value of more than $900 million. Its 136 percent year-to-date gain compared with a 53 percent advance by Executive Risk Inc., which owed its number-two status to a takeover agreement.
|
