Oh, this will settle things down quickly — not. The SEC has opened an inquiry into possible manipulation of Bear Stears stock by hedge-fund short-sellers spreading rumors about the company’s solvency.
The Securities and Exchange Commission probe is focusing on whether hedge funds or other investors bet on a drop in the company’s shares while disseminating rumors that the New York- based firm was nearing collapse, said the people, who declined to be identified because the inquiry isn’t public. The New York Stock Exchange’s regulatory arm is also involved in the investigation, the people said.
Speculation about a cash shortage spurred customers and lenders to pull money from Bear Stearns last week, driving the shares down 57 percent between March 7 and March 14. Two days later, the fifth-largest U.S. securities firm was acquired by JPMorgan Chase & Co. for $2 a share. The company’s decline coincided with a surge in investor bets that the stock price would plunge. The SEC’s probe is unusual because most of the regulator’s stock-manipulation cases focus on penny stocks.