NEW YORK (TheStreet) -- Ambac Financial Group's (ABK) largest stockholder, Third Avenue Management, announced Wednesday in a 13-G filing with the Securities and Exchange Commission that it had disposed of 65% of its holding by Jan. 31.

This disposal of 17.5 million shares, reducing TAM's holding from 9.31% to 3.24%, is very revealing. Should the smaller stockholders, with "blind faith" in the recovery of Ambac, be concerned?

The timing of the sale is a little odd, coming just before the fourth-quarter earnings release, due in early March. Although TAM may have been disposing of the stock since October, at least 2.9 million shares were sold in January.

What's even more interesting is that TAM has a very low turnover of its $4 billion in investments, so selling such a large stake as the markets struggle to recover could have deeper meaning.

TAM says on its Web site that "one proven value philosophy guides each of our investments. We seek to invest in safe companies that are cheaply priced."

TAM cites strong finances, competent management, understandable business and attractive growth prospects as key criteria, among others, for investments. It appears that Ambac no longer meets the criteria even though TAM has already taken a tremendous loss on its position.

Most concerning of all is that former Ambac CFO and senior managing director of capital markets and structured credit, Tom Gandolfo, is a senior analyst for TAM. He has an intimate knowledge of Ambac and its finances and must have been advising TAM since he joined in 2008. If he was unable to see a good reason for TAM to hold on to the stock, why should anyone else?

Perhaps stockholders should take heart from the fact that TAM still holds 3.24% of the stock.

Citigroup

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, with 6.26%, is now the somewhat reluctant new largest stockholder. Most of its position, according to a Citigroup source, was taken as a result of a CDO transaction in late 2008. Perhaps this was how part of the $850 million settlement reached with Ambac was paid?

Other positive signs are that Ambac recently adopted a tax-benefit preservation, shareholder-rights plan designed to protect Ambac's $4.5 billion of net operating losses. Why would it do that if it knew it was in its death throes, as some believe?

A restructuring effort could be good news for Ambac. Clearly, the Wisconsin insurance regulator would have been involved in the discussions leading up to an appointment and therefore tacit agreement could be deduced. Look for an announcement during the conference call after the earnings release.

Unfortunately, there are two unresolved issues. One is the fourth-quarter results. How the group is doing will not be entirely clear until after the filing of the Ambac Assurance financial statements. These will not take place until after the earnings are released, and they contain extremely important financial data, including the crucial minimum capital and surplus numbers.

The second is that Ambac still needs to answer the delisting threat from the

New York Stock Exchange

. It is very clear that Ambac cannot reach the required standard by the end of February, needing a 100% increase in price to an average price of over $1.25.

That means that either it hopes the price will rebound after the earnings are released and plans for restructuring announced, or it will have to do a reverse split on the stock. One other alternative, making the rounds, is that

Blackstone

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will be negotiating the sale of the group in its entirety. That appears unlikely, although a sale for stock is feasible.

Unfortunately, restructuring, reverse splits and a sale do not necessarily do much for the shareholder value, even if they save the company. The best hope from these actions, in the short term, would be a large pop as the news breaks.

The stock has fallen 9.1% this week after a 7.1% recovery was mounted on Thursday. It is speculative for a reason.

Reported by Gavin Magor in Jupiter, Fla.

Gavin Magor is the senior analyst responsible for assigning financial-strength ratings to insurance companies. He conducts industry analysis and supports consumer products. Magor has more than 22 years of international experience in operations and credit-risk management, commercial lending and analysis. His experience includes international assignments in Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.