Suing an analyst over a report is akin to blaming the shorts for your stock price: It is a waste of time and corporate resources, a huge distraction to management.
Note the (chart below); our quantitative review of the stock — pure math, no opinions — was a Sell rating back in April.
Even without that system, and without having read the Bove report or BankAtlantic’s complaint, I am deducing a very valuable piece of information from the company from this issue: I don’t want to own BankAtlantic Bancorp (BBX): Their priorities are misplaced, and with the stock at $1.99, they are spending precious capital on nonsense.
Here’s a quick excerpt from WSJ:
BankAtlantic Bancorp Inc. filed a lawsuit against well-known Ladenburg Thalmann analyst Richard Bove and his firm seeking damages for defamation and negligence stemming from a widely distributed report entitled "Who Is Next?" following the collapse of IndyMac Bancorp Inc.
BankAtlantic shares lost a third of their value on July 14 after Mr. Bove included the Florida bank in his report, but bounced back after the company put out a press release saying it remains well-capitalized. A number of banks’ stocks were pummelled that day as well.
BankAtlantic’s stock was recently off 8% at $1.55; the shares have fallen steadily since the beginning of 2007 when they traded around $14.
In a statement Monday, BankAtlantic said, "The problem is that, while Bove’s report purports to consider which banks might fail, he failed to examine the health of the banks and thrifts in his report. Instead, he only examined holding company data which, in at least our case, is meaningless information. This is simply shocking."
In asserting its viability, BankAtlantic said its ratio of non-performing loans to total loans is 1.25%, while its ratio of non-performing loans to capital and reserves is 12.5%, both well above well-capitalized standards.
Shame on the corporate attorneys involved in this absurd waste of time . . .
UPDATE July 21, 2008 8:14pm
Here’s Bove discussing the litigation: "I wouldn’t do anything different"
click for video
Source:
BankAtlantic Sues Analyst Bove
By LAUREN POLLOCK
July 21, 2008 3:30 p.m.
http://online.wsj.com/article/SB121666574889070975.html
BankAtlantic Sues Analyst Richard Bove for Defamation
Edvard Pettersson
Bloomberg, July 21 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKq4yHbl1Ejk&
This is nothing more than intimidation. They must be feeling quite vulnerable to resort to something this heavy handed.
Barry,
I’m threatened by investor relations and company lawyers so often I don’t answer the phone. It’s pretty funny when the lawyers find out my “mistakes” are taken directly from the SEC filings.
but this is just what you’d expect when the SEC outlaws selling financials short, and subpoena’s financial firms in a fishing expedition aimed at “rumor-monering” when it’s just GOVERNMENT INTIMIDATION and CRONY CAPITALISM, pure & simple. what’s next? you not only cant sell short, YOU CANT SELL AT ALL? you must buy more? maybe Paulson and Cox will recommend draining what’s left of US personal savings accounts to buy HAND OVER FIST the shares of our wonderful banks, both commercial and so-called investment. (actually i think it’s kinda funny that it’s Bove the cheerleader who’s the first one to get it)
Watch it Barry you will be investigated and sued for influencing the market.
If anything, we should sue analysts for pumping stocks up. All a company has to do to refute Bove is put out the facts as they see them and make a good case…don’t sue the guy. Guess he won’t be invited to the analyst day.
BTW, my constant harping on lack of short interest in the Apples and Googles of the world has now claimed those two as victims. Can’t sue me, because I was right. Nas futures down 34. Well on our way to Nasdaq SC (Smoldering Crater).
Since short selling financials stocks, at least some, is now prohibited, doesn’t this just push any bottom farther out. And, it will ultimately make the crash much harder.
Alos, GO LAWYERS!!!
collect them legal fees boys!!!!
Bove deserved to be sued…not for his call on BankAtlantic, but rather for him being wrong on just about every financial call he has made in the past year.
~~~
BR: Eric, I am the last person to defend an analyst, but he has had numerous excellent calls on the Banks and Brokers this past year.
And when an analyst makes a good faith effort and is wrong, if you believe that is the basis for a lawsuit, then you are in the wrong country.
If they weren’t a 2 buck stock , by suing Bove , the signal given would be to short them at once…. frankly , they’re not worth the trouble or effort. BTW , it’s not like Bove is not friendly to the banks ….
I am shocked…SHOCKED to hear you suggest that one of our fine, honest, hard-working financial institutions “deserves to go belly up” simply because it is too small to be significant.
I agree with you regarding the general unfair criticism of respected and completely accurate reports such as those published by M. Whitney among others, but on this particular case I disagree with you.
They are a bank. If the report causes investors to shun the stock, casts doubt on the bank’s financial position, possibly causes a run on the bank, how is suing a waste of time? How else can they defend themselves if the report is wrong? Half of the people won’t believe any defense coming from the bank itself. I know what you’re going to say: if the bank is solid an analyst’s report shouldn’t have that big an impact. The problem is precisely that _they are a bank_. It doesn’t matter if they’re solid or not, if there is a run on any bank on the face of the planet tomorrow it will file for bankruptcy.
If an analyst puts out a sell recommendation with a lowered target on AAPL, that has very little impact on Apple’s business. If, on the other hand, an analyst releases a “who is next” report on banks singling out specific banks as next to go, he’d better have his facts 100% correct and double checked, or he should be sued because he is threatening a business that would otherwise survive without question. The fact that he got sued will simply cause other analysts to check their facts and better understand what they are talking about before putting out reports containing apparently shameful errors. I think you misunderstood the reason for the suit. It’s not because of what he had to say, it’s because it was flat out false, the ratios are unequivocally wrong.
This is the same analyst that a few months (and about 10 percentage points) ago was calling the banking sector a generational buy. He is simply not qualified and should be reassigned another sector, preferably an easier one, but at least one where his incompetence can do little damage.
I seem to remember academic studies that show companies who attack shortsellers and analysts tend to underperform the market.
RichardN,
By that logic, you cannot ever put a SELL on a bank !
WTF ?
BankAtlantic just handed Bove the gift of a lifetime. You cannot buy that kind of publicity.
Win lose or draw, Bove just made out like a bandit.
(And yes, the fact that BA management has time for such stupidity means that their ranks need thinning. It’ll save on salary costs, too.)
I seem to remember academic studies that show companies who attack shortsellers and analysts tend to underperform the market.
I wonder what that says about the SEC and Mr Cox.
I think I had read something about BBX board members who were related, and the misuse of company funds. Maybe he’s just trying to get a bounce going so he can sell his shares…at quite a loss.
Liz looks great!
Liz looks great!
Barry, please point me to one of Bove’s calls over the past year that has been correct as you say he has made many good calls over the past year. This guy has called more bottoms in the financials than Luskin has called in the markets. He was saying how cheap the banks were back in March only to watch them get 30% cheaper. He said Bear would not go down. Why this guy continues to be labeled the banking guru by yourself and the media continues to puzzle me? Ms. Whitney continues to make correct calls, however, everytime the banks are in the news Bove pops up with another wrong call.
I can’t believe the comments on this post omit the most important fact regarding Richard Bove. As an analyst he is a mess. I would be more than happy to match my percentage of Return On Investment regarding the financials , via put options, against Boves’ picks over the last year. Anyone for a generational buy in bank stocks? I don’t want to be sued so I will close with this: H-A-C-K P-U-M-P H-O-M-E-L-E-S-S
Early last month, Bloomberg cited Bove as one of the top two analysts who made investors the most money in the past year.
Bove and other outspoken analysts, like Oppenheimer & Co.’s Meredith Whitney, were among the first of their peers to call out banks and brokerages on their overextended leveraging and their need to raise capital before the first rumblings of a credit crisis.
Bove’s candor and accessibility to the media have earned him frequent guest spots on the financial television network CNBC and quotes in major national newspapers. Still, Bove says he sometimes feels overwhelmed by the amount of calls he gets each day from the media. But Ladenburg ThalmannLTS, Bove’s employer since May, when the brokerage bought Punk Ziegel, loves the publicity.
“Their message to me is talk to everybody all the time,” Bove said in an interview with TheStreet.com.
Bove’s popularity with the media may be due to his outspokenness, but perhaps also because he has been right on his calls more often than not in recent years. He has been named by The Wall Street Journal, Forbes and Zack’s, among others, as a top stock-picker and earnings predictor.
http://www.thestreet.com/print/story/10424474.html
I remember Bove stating that his ” generational buy” statement regarding bank stocks “may have been premature.” The word “WRONG” sums his call up succinctly. Analysts NEVER say they are or were wrong. To many people have lost and lose money based on the “analysis” of Mr. Bove and his ilk. I have no sympathy for him as “his good faith” has a horrendously terrible track record. Corporations and traders deserve a recourse as to recompense for PROVEN bad/non existent analysis. Example: What analytical criteria did Mr Bove employ in his determination of bank stocks being “a once in a generation buy” beside the fact that the banks stock prices were getting DESERVEDLY pummeled in trading. What analysis did he employ to determine the “bank model” going forward, that would make his statement fact? To simplify even further: HOW DO YOU MAKE AN ANALYSIS SUCH AS THIS, WHEN THE BANKS PUBLICLY STATE THAT THEY DON’T KNOW THE TOTAL OF BAD DEBT ON THEIR BOOKS OR WHAT PERCENTAGE OF IT ACTUALLY HAS A MARK TO MARKET VALUE?
Barry, O.J.Simpson used to receive good press also.
Problems Are Obvious To Everyone That Is Not Involved In Finance
Most of the CEO’s of finance companies, mutual fund manager, hedge fund managers and analysts have been blinded by their involvement in the markets.
Every decision and analysis they make is biased because of it.
Hence, they’re not able to see how overvalued most companies, especially financials, are.
Nor are they able to see how bad the economy is.
ecklebob:
I didn’t say the guy was perfect — he has a long history, and has made a lot of good, ballsy call.
He flipped bullish too soon — but he was bearish on banks and brokers long before most of the street realized there was any problem.
Remember, I was on the other side of the debate with him on CNBC when he was bullish (and I was not)
What else can I tell you — if you think he sucks, then disregard his work. Lots of smart money and good hedge funds find value in what he writes . . . You seem to have made up your own mind, but others should note that there are reasonable people who disagree with you.
Well put Eckle..if I hear Bove use his cash flow argument one more time I may puke. He continues to claim that it does not matter that the assets are deteriorating on a daily basis because they are non-cash charges. His analysis is very flawed in my opinion and anyone taking his once in a lifetime call back in March got hit hard. This guy is reminding me more and more of Cramer. Putting him with Meridith Whitney would be like trying to put David Malpass with Milton Friedman.
Barry, are you suggesting that only “unreasonable people” agree with me?
could be intimidation.. (a general anti-shorting bias is in the air)
could be a “Schumer-like” fig leaf for BA’s impending demise…
pretty Ironic if one of the financial sectors biggest pump-monkey’s gets taken down by a rare bear call…
I was trying to concentrate on what Bove was saying, but Liz’s cleavage at the bottom of the screen is incredibly distracting (and attractive).
Just thought I’d correct johnnyvee on the “shorting some financials is no prohibited” or whathaveyou. You can short, you just can’t do a naked short. This does not affect retail investors. E-Trade proudly assures you that you can short away, and I have. The whole “no shorting” thing is aimed at just at some brokerages or other traders who sometimes short without actually borrowing the stock. Nothing to see here, it is just lip flapping from the powers that flap.
>> Barry, are you suggesting that only “unreasonable people” agree with me?
Ecklebob, I did not read it that way. I really don’t.
The real crime is retail not getting any money for the short sales of their custodian / broker-held securities.
Congress should look into that.
This is the same analyst that a few months (and about 10 percentage points) ago was calling the banking sector a generational buy. He is simply not qualified and should be reassigned another sector, preferably an easier one, but at least one where his incompetence can do little damage
—————–
He is a product of our times: out of control American optimism exported globally.
If you reassigned most Americans to their level of competence you’d have a major system overhaul!
Why is it that our leaders are not being sued for mismanaging excessive valuations? Why don’t CEOs come out and tell their shareholders that valuations have maybe gotten out of hand? Had they done this, we would not have so many distressed banks.
At the end of the day, the problem is systemic and this analyst is a scapegoat.
Plus ça change, plus c’est pareil.
Dick head Cramer (a former hedge fund trader) now doesn’t like those pesky short sellers. They ruin people’s lives i tell ya’!!
“Today will be riotously ugly. Today’s a day where you could take down a Capital One (NYSE: COF) (Cramer’s Take) or a Citigroup (NYSE: C) (Cramer’s Take) — some bad credit card exposure there — off of American Express (NYSE: AXP) (Cramer’s Take). You can bang down Nat City (NYSE: NCC) (Cramer’s Take) into oblivionville off of it and hammer Merrill Lynch (NYSE: MER) (Cramer’s Take) to the point where you could hear the rumors fly of capital needs. Freddie (NYSE: FRE) (Cramer’s Take), merciless Freddie, right at ya. Today’s the day when the uptick rule would be the only friend to the notion of owning stocks without fear every minute, fear that they will break your stock. Today’s the day that the uptick rule can save Lehman (NYSE: LEH) (Cramer’s Take) from $14 or lower. Today’s why we need it.
Yet, every time I do a piece that talks about the need to reinstate the uptick rule or enforce the naked short laws, I am immediately greeted with the same nonsense: why should the longs get protection the shorts shouldn’t? In fact, other than the usual gang of two — Patrick Byrne and David Patch — I don’t get any positive feedback on these pieces like the one I did last night on “Mad Money.”
Why aren’t they treated equally? First, I question constantly how anyone could even think they are treated equally: I think the shorts are now heavily favored because they can instill fear and panic that the longs don’t have the ability to do. They can destroy businesses — the ultimate goal — and the longs can’t. I don’t like that, I don’t like it because the great history of the stock market shows that it works better if we regulate the shorts, to make it so they can’t overwhelm the longs. The creation of wealth, not the destruction of wealth, is what the market is supposed to be about, it is why it is worth participating in at all, otherwise the mattress or bonds — only good for the most solvent of operations — make more sense. Wealth creation is what the stock market’s about. That’s not what the shorts are about. They can exert a well-needed discipline on valuation. They can even exert a regulatory role in the absence of any serious regulation about the finances of a company. But otherwise, their contribution to society can’t really be stressed as something that should be the republic’s goal to preserve and protect. The public’s interest could do better without them.
Let’s say the goals of the stock market are equal, wealth destruction and wealth creation. Then I would 100% favor total equivalence and would laugh at the uptick rules and the naked shorts rule that makes it so easy to sell stock without borrowing it. If you believe that wealth destruction deserves equal protection, I am dead wrong. I think that’s a preposterous proposition, right down to the preamble of the Constitution.
Right now, today, we all know the truth: If you are a short-seller, the shorts are able to create an environment that can destroy the companies underneath, not just the stocks themselves. Certainly any company that has more capital than it needs does not need to be protected and can use the short-selling to buy in stock. But any company that needs credit as a method of operation, as all financials that are not levered do, can be effectively destroyed overnight by the shorts pushing the stocks down and sowing that panic that makes the companies vulnerable to closing.
Another joke of “equivalence,” another edge the shorts have over the longs is the amount they can short vs. the amount that a company can buy. Using naked shorting, short-sellers can sell short as much stock they want on a given day. They can overwhelm any stock. The companies themselves, though, are strictly and severely limited to what they can buy. Why can’t the rule be changed for the companies that do the buying to they are equivalent and not helpless to the shorts just flooding their stocks with supply on a given day? Why can’t they buy as much as they want? Why are the companies regulated about what they can buy, but the shorts are able to sell an unlimited amount of stock — at least for all but the sainted few financials in the temporary protection order that SEC Chairman Cox served up last week that went into effect yesterday?
More important, does anyone think that the fear created by shorts is less punishing than the greed longs can create? Does anyone think they are equivalent? Does anyone think that you can hype a financial, for instance, higher and quicker than you can destroy it?
There are sound psychological and financial reasons, not just historic reasons, for my view.
Notice, I am never for a minute denying that there aren’t a lot of fraudulent companies out there or overvalued companies. Never for a minute am I against shorting. I made millions of dollars shorting. I did it following the old rules. I can tell you, when the old rules were in place and hedge funds weren’t running the joint, often bigger than their target, I never heard anyone complain that the schematic was wrong or evil or misplaced or unfair. It was accepted that it wasn’t in the market’s interest to be able to raid companies down and it was acknowledged by all that you could destroy a company by attacking its stock recklessly through driving down all the bids with short sales that weren’t legitimately borrowed.
The fact that there are so many people who defend this new system shocks me. Since when is it in the government or the peoples’ interests NOT TO PROTECT solvent firms from needless runs on the bank caused by shorting?
The day I have to defend the right of legitimate institutions to exist and not be prey to short-sellers armed with rumors and no borrowed stock is a day I just think it is worth saying that the goal of the market is to lose as much as can be made or more. That’s not how I view the goal of the markets. If you do, I think that you simply believe that I am dead wrong, and I welcome the disagreement.
These rules need to be put back in place. The slippery slope of ETF HOLDRs, that basically say, “You can bang down stocks, so why not get rid of the rules?” should also be turned upside down with a 10-cent tick rule, meaning you have to wait until you have a buyer willing to pay 10 cents higher. All of the academic work supporting this nonsense was done in a bull market vacuum encouraged by a laissez-faire administration that truly believes capitalism can regulate itself. If anything, if left to its own devices, it destroys itself. Even the communists, morons that they were, knew this.
Think about this view today as you lose huge amounts of money in this declining bear market.
You just might agree with me.”
What a tool!
With all this fanfare about the actual act of BankAtlantic suing Bove, I do not see many of you media-types actually looking into the allegations themselves.
Simply put, Bove screwed up with regard to BBX. He mixed and matched financials from a holding company (BFC) with that of the bank itself to paint as gloomy a picture as possible. From what I understand (and what BBX’s investor relations dept has told me), other than an investoment relationship, the financials of these two companies have nothing to do with each other. If BFC were to declare BK tomorrow, BankAtlantic wouldn’t feel so much as a whisper.
And the notion that BBX is somehow distracted by filing a lawsuit is rediculous. Do you think the board or executive management is litigating this themselves? What a silly thing to say.
This issue has shown sloppy reporting all the way around, which only reinforces my thought that the American media machine is broken. I’ve seen this analyst all over TV, but I have not once seen a representative of BBX there to explain their side. I guess the financial media are circling the wagons.
And in the interest of disclosure, I have a position in this bank. I managed to get in at 0.94, and I intend to stay in for a while.
August 1, 2008
I am writing today in reference to shameful and criminal acts by Bank Atlantic. On July 22, 2008 I logged into my account online too see that I had been charged $160 in overdraft fees in one day. This happened shortly after I was fired by a crooked employer who to this day still not has paid me money that I am owed. I deposited a check into the account from my wife’s employer the previous weekend that cleared without issue, but not until the following Wednesday, the day after I was charged the fees. These overdraft fees were a result of me and my wife using my Bank Atlantic bank card to make purchases.
Having several conversations with multiple representatives from this bank, I have discovered that they have policies in place to ensure that these charges will be forced, and that they will in fact rearrange the order of any card transactions to maximize these charges. I asked again today why my transactions are simply not declined if I do not have available funds to cover the transaction. I was told by a bank manager that since I deposited a check in advance, their system would approve the transaction, and then charge me an overdraft fee if the transaction hits the bank before my deposit clears. So if I had not made the deposit, the transactions could have been denied and I would not have been charged the transactions. But since they knew there was more money on the way, they had the ability to simply take that money from me.
I have also been told that when these transactions clear, the bank system intentionally puts them in order from largest to smallest. This policy ensures that the maximum amount is taken out first, so that the account is considered overdrawn when the smaller transactions are applied. This allows for additional overdraft fees to be applied even if the account wasn’t actually overdrawn when those smaller purchases were made.
This has happened at a time when I am having severe issues providing for my wife and child. As I mentioned, I was recently let go by a crooked employer who is refusing to pay me money he owes me. I was struggling to find a job when this happened, as are many other Americans right now. And I am still trying to find a way to borrow the money required to pay my families rent. I am also concerned about being able to pay for gas to get to the new job I start next week.
I have had several conversations with a number of representatives regarding the 5 overdraft fees that hit my account. I was treated like I was the single most worthless human being on the planet by some of the Bank Atlantic customer service reps, although a handful of people did express concern for my family. Taking $160 from my family while knowing that so many families are struggling to make ends meet is not how any professional organization does business. This is the single most shameful act I have had to deal with seen in my life. Knowing that I had $160 taken from me, I was told by Bank Atlantic representatives that I was being difficult, I was told to “get over it,” I was insulted several times, and my wife was treated in a similar manner. Because of my complaints, they are now closing my account.
This is a bank that is open 7 days a week, every time I go into the bank they ask me to refer a friend, and they give gifts to those who open accounts. I’m sure if I did the math, I would find that they spend more than $160 on marketing per person to get these accounts open. So how do they justify pushing me to the side over this amount of money? This is a large amount to my family, but can’t be much to a bank. I cannot be expected to believe that the way in which they handled these transactions to maximize the overdraft charges is legal. It certainly is not ethical, and organizations such as Bank Atlantic must be held to higher ethical standards. We see from the current housing and credit crises that there is a large economic impact when banks decide to brush aside ethics.