NEW YORK ( TheStreet) -- Bank of America (BAC - Get Report) shares plunged 20.07% Monday, as investor concerns continued to snowball amid a market selloff, a lawsuit from AIG (AIG - Get Report) and the sale of more than seven million shares by hedge fund Appaloosa Management.
Appaloosa Management, the multibillion dollar hedge fund run by former Goldman Sachs trader David Tepper, sold his Bank of America (BAC - Get Report), sold more than 7 million shares, reducing its stake to 10 million shares as of the end of June, according to a filing with the Securities and Exchange Commission Monday. A person close to the fund says Appaloosa has cut its stake further since that time.
AIG says in its lawsuit, filed in New York State court Monday, that fraud by Bank of America and Countrywide cost AIG some $10 billion in losses on $28 billion in residential mortgage backed securities (RMBS) investments. AIG is seeking to recoup at least that amount.The lawsuit is only the latest of tens of billions in similar claims brought by a host of high profile plaintiffs including government sponsored enterprises Freddie Mac (FMCC.OB) and Fannie Mae (FNMA.OB), as well as private companies including BlackRock (BLK), PIMCO and Goldman Sachs (GS). Bank of America sought to defend itself against the AIG allegations in a statement sent to TheStreet. "AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors. We reject its assertions and allegations," the statement read. As for Monday's selloff, spokesman Jerome Dubrowski said that while the bank has a policy of not commenting on its share price moves, the bank is "a much stronger company today than it was a year ago and two years ago." He says the bank has "significantly strengthened" its balance sheet, liquidity and regulatory capital ratios, while upping its reserves for RMBS "putbacks" to $18 billion at the end of the second quarter from $4 billion a year earlier.