Updated from 11:01 a.m. EDT
A day after rumors floated that
was facing bankruptcy, the builder's shares surged amid news that respected hedge fund Citadel boosted its stake in the company.
The stock move erases much of the losses from Wednesday, when Beazer shares plunged 18% after
rumors circled of a liquidity crisis at the homebuilder.
Beazer denounced the rumors of such a crisis as "scurrilous and unfounded."
One sell-side analyst who spoke on the condition of anonymity said the only way Beazer could face bankruptcy is if there is fraud in the financials.
Whenever the possibility of fraud lurks, then lenders become nervous and potentially pull credit lines. This scenario played out with subprime lender New Century, which declared bankruptcy earlier this year, in part because lenders became jittery after the company disclosed massive accounting errors.
Based on Beazer's last stated balance sheet, bankruptcy looks very unlikely, the analyst said. The company has a new revolving credit facility with zero drawn on it, along with just $18 million of long-term debt coming due this year.
However, Atlanta-based Beazer is under formal investigation by the
Securities and Exchange Commission
about alleged violations of federal securities law, which leaves investors wondering whether there is the possibility of fraud lurking.
The new investment by Citadel is a strong vote of confidence in Beazer. The $20 billion hedge fund disclosed that it now owns 2.2 million shares of Beazer, amounting to a 5.7% stake, according to a filing with the SEC Thursday morning. Previously, Citadel owned 1.2 million shares.
Beazer shares were up $1.53, or 13%, to $13.01 in recent trading.