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.

Some of the shares were sold in negotiated transactions, says a source familiar with blank checks. In a negotiated trade, the transaction is not always immediately reflected in the stock price. Often the transfer may not be apparent until the trade is settled, a process that can take up to three days.

The selling by Amaranth has pushed down the price of some blank-check stocks, but not all. In fact, a sources says the price of many of the blank-check stocks did not drop much despite Amaranth's selling because the hedge fund was able to find buyers at a price close to the market rate. It's not clear who were the purchasers willing to buy the shares.

Still, the blowup at Amaranth is just the kind of bad news that the blank-check market did not need. In recent months, blank-check IPOs have begun receiving a chilly reception from investors. A number of deals either have been postponed or have traded below their offering prices.

Some of the slack in the market no doubt reflects the fact that roughly 65 blank-check companies have gone public since August 2003. Yet, to date, only eight blank-check companies have actually completed a merger with an existing business.

For the past three years, Wall Street has marketed blank checks as a relatively safe way for hedge funds to invest in private equity because investors can get most of their money back if the company can't find a merger partner in 18 months.

For big hedge funds like Amaranth, blank checks seemed like a gamble worth taking. In retrospect, Amaranth's big bet on blank checks seems a lot safer than its natural gas trades.