IPO Blank-Check Bounce

Amaranth's massive $4 billion bad bet on natural gas prices is creating shock waves in the market for so-called blank-check IPOs.

Amaranth, a hedge fund that once had $9 billion in assets, was one of the biggest investors in initial public offerings by fledgling companies in search of a business plan. The investment banks underwriting blank-check offerings had come to count on Amaranth to take 5% to 10% equity stakes in these speculative stock deals.

But that was before Amaranth's energy trading desk, led by Brian Hunter, gambled badly on natural gas in a calamitous trade that left the fund 35% in the red for the year. Now sources say Amaranth is selling shares in blank-check companies with lightning speed, as the Greenwich, Conn.-based fund tries to stabilize itself and respond to margin calls from its brokers.

A margin call is a demand from a broker that a hedge fund either post more collateral for a stock loan, or immediately pay off the debt that's due. In the wake of last week's bad natural gas trade, Amaranth has been fending off margin call after margin call.

A market source says Amaranth has sold stock in some of the blank-check companies it invested in on Monday and Tuesday. These companies include Acquicor Technology(AQR), India Globalization Capital(IGC), Star Maritime(SEA) and Healthcare Acquisition(HAQ). An Amaranth spokesman could not be reached for comment.