Beazer Homes USA, No. 7 in the 2006 BUILDER 100, saw its stock dip on Wednesday nearly 20 percent as the market prepared to close. Earlier in the day, the stock dropped as low as 42 percent, prompting the Atlanta-based home builder to issue the following statement:
"We have become aware of rumors circulating in the market about Beazer Homes' liquidity and a prospective bankruptcy filing. We do not know where these scurrilous and unfounded rumors started. For an accurate representation of the company's financial position, including the company's liquidity and near-term prospects, we encourage investors to refer to the company's recently released third quarter earnings release and the script of our conference call with analysts and investors."
Beazer Homes, which recently reported a second quarter loss of $123 million, is currently under investigation by the Securities and Exchange Commission..
Some Wall Street analysts dismissed the rumors; Tony Avila, managing director for home building, building products and real estate at San Francisco-based investment banking firm JMP Securities told BUILDER Online in an email that there was "nothing to the rumor."
Joseph Snider, a senior credit officer at Moody's Investors Service in New York echoed Avila's sentiment.
"I think the short-sellers had a nice time jerking people around," he told BUILDER Online. "They are taking advantage of the fact that there is a lot of nervousness in general about the market - in particular, about home builders. And there is a lot of nervousness about Beazer Homes to begin with."
"And then you overlay on top of that the nervousness about the subprime mortgage market," he continued, "any hint or whiff of bad news, whether it is unfounded or not, whether there is basis or not, they are going to have some effect on the stocks and bonds."
Snider says Beazer Homes is actually positioned better now, despite a poor second quarter.
"Point of fact, Beazer Homes is more liquid now than it was just a few months ago," he said. "The notion that they might be imminently filing for bankruptcy is pure nonsense."
Beazer Homes did not return BUILDER Online's request to comment further on Wednesday's developments.
Learn more about markets featured in this article: Atlanta, GA.