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There's nothing quite like a bandwagon pulling away to make people jump on, even if it's heading toward a cliff.

In this case, the bandwagon is

Jayhawk Acceptance

(JACC:Nasdaq), the Dallas-based automobile financing company. When Jayhawk looked like a money machine, plenty of people jumped on board, seemingly dismissing -- or at least forgetting -- the high-risk nature of lending money to people with poor credit. Now, of course, Jayhawk is at the cliff's edge, having said Thursday that it intends to file for bankruptcy protection under Chapter 11.

Jayhawk's stock has plunged. It closed Friday at 2 1/4, down 1 13/16. And it has fallen roughly 83% since reaching 15 1/4 last October. Jayhawk is just one of the recently battered auto finance companies, which once were stock-market stars. Another was

Mercury Finance

(MFN:NYSE), which disclosed more than a week ago that it overstated its profits for four years and since has been unable to make good on millions of dollars in outstanding commercial paper.

Before the fall, however, Jayhawk's fans included analysts and even its key lender,

Fleet Financial Group

(FLT:NYSE). In fact, a unit of Fleet, which this week told Jayhawk it would deliver a notice of default and acceleration on the company's revolving credit agreement, in January 1996 boosted Jayhawk's credit line to $65 million from $35 million. A Fleet spokesman didn't return a phone call seeking comment.

"All of the analysts are fairly shellshocked," says Jerry L. Robinson, who followed the company for


in Little Rock, Ark.

It's easy to see why. As recently as December, Joseph A. Jolson, of

Montgomery Securities

, and Dennis Telzrow, of

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Principal Financial

, both rated the stock a buy, according to


a financial data and information service. Neither Jolson nor Telzrow returned phone calls seeking comment. But San Francisco-based Montgomery was Jayhawk's lead underwriter in both its 1995 initial public offering and in a second public offering last year.


Alex. Brown & Sons

in Baltimore, analyst Sean Aurigemma had the stock rated as a strong buy until September, when he cut it to a buy. Only after Jayhawk released its fourth-quarter earnings report, which included an unexpected $15.5 million charge to cover bad loans, did Aurigemma cut his rating, and then he reduced it only to neutral. Alex. Brown was a key underwriter in Jayhawk's IPO in 1995. Aurigemma couldn't be reached for comment.

Or look at Robinson, the Stephens analyst. He had a buy rating on the stock until early December, when the company disclosed that its fourth-quarter earnings would be cut by the start-up of its plastic-surgery lending business. Then he cut the rating to hold.

Many of the sell-side buy ratings had remained in effect even after Jayhawk's third-quarter earnings report, in which it said that the percentage of gross installment contracts receivable in nonaccrual status soared to 28.7% from 19.1% a year earlier, and that charge-offs skyrocketed to $22.5 million from $2.05 million a year earlier.

In an interview, Robinson says he reduced his rating in December because he was worried Jayhawk's management was focusing too much on the medical lending side and too little on its main business, auto lending. So why not cut the rating to a sell? Robinson says he didn't think Jayhawk deserved it. Moreover, "If you go to a sell, the company won't talk to you anymore, and we still felt it was a worthy company to follow," he says.

"I can't tell you that I called the credit problems as bad as they were," he adds. "The company was telling you that everything was fine." And Robinson was unencumbered by worries about Jayhawk doing business with his firm. Stephens hadn't done any underwriting for Jayhawk. "In the purest sense I was an independent analyst," he says.

Still, Robinson says he was able to get most of the firm's clients out of Jayhawk's stock before the bottom dropped out. "I didn't step in front of the bus, but I sure as hell felt the breeze as it went by," says Robinson, who dropped coverage of Jayhawk Friday.

And it may not be just the sell side.

Acorn Fund,

a high-flying unit of

Acorn Investment Trust,

held 496,000 shares of Jayhawk and 898,000 shares of Mercury Finance as of Sept. 30. In addition, the

Acorn USA

fund held 28,000 shares of Jayhawk as of Sept. 30. The company declined to comment.

By Erle Norton