Tarragon ( TARR) finally admitted to liquidity issues and said it may not be able to continue as a going concern, giving additional weight to short-sellers' claims that the small-cap homebuilder may be forced into bankruptcy.

Shares recently were plunging 92% to 62 cents -- a far cry from the $12 they were going for at the start of this year. TheStreet.com reported in April about short-sellers' belief that Tarragon was facing a looming liquidity crisis .

The stock was halted for trading Thursday after shares fell more than 50% earlier, on more than 12 times the stock's daily average. Shortly after the halt, Tarragon released a statement saying it would delay its latest quarterly filing because it is "currently experiencing liquidity issues caused by the sudden and rapid deterioration in the real estate credit markets."

The troubles have resulted in Tarragon being unable to complete approximately $50 million in financing transactions that had been under negotiation and were expected to close in August 2007, the company said.

The company also said it had not made its August debt-service payments, along with certain other vendor payments.

The problems obtaining loan modifications and additional financing "have materially affected Tarragon's liquidity, including the ability to repay existing indebtedness as it becomes due and meet other current obligations, and raise doubt about Tarragon's ability to continue as a going concern," the company said.

A $125 million land impairment charge led to Tarragon breaching a financial covenant contained in its existing subordinated debt.

As a result of the problems, Tarragon said it was delaying a planned spinoff and has hired Lazard to consider strategic alternatives.

The news is a win for short-sellers, who have been relentless on Tarragon.

Much of Tarragon's problems stem from its overpaying for Florida rental properties in recent years, with the eye of converting them to condos.

All along, William Friedman, the company's CEO, has held a resilient stance, telling investors that there was nothing to worry about. His now-pulled plan was to split the company in half into a homebuilder firm and a rental property owner in order to show all the value.

In an interview prior to that investor meeting , Friedman told TheStreet.com: "I think it takes someone with brass balls to short 3.5 million shares of my company's stock. If I were in that position I would be spreading false rumors like crazy."

Since that interview, the short interest on Tarragon has risen to 5.85 million shares, as of the latest July numbers. That accounts for 84% of the stated float. Friedman and his family own about half of the company's 28.7 million outstanding shares.

Paranoid investors usually claim some form of illegal naked shorting exists to drive down a stock. Friedman recently gave TheStreet.com this same explanation for the ongoing plunge in his stock.

In late July, Tarragon issued a press release pointing to "unusual trading activity" in its stock and said there has been no material change to the company's financial position.

Friedman did not return a phone call from TheStreet.com on Thursday.

Friedman himself has a spotty history. He was barred from the savings and loan industry by the Office of Thrift Supervision in 1994 for his involvement as vice chairman of Southmark Corp., a real estate investing fund that went bankrupt in the early 1990s.

At an April investor meeting that is set to go down in infamy for its silliness, Friedman said Tarragon's stock was worth at least $20 per share.

While Tarragon fell sharply Thursday morning, other homebuilder stocks continued their rally from Wednesday , when Toll Brothers ( TOL) reported better-than-expected revenues and the Mortgage Bankers Association released positive mortgage applications data.

Among the leaders Thursday were Beazer Homes ( BZH), which rose 10.2% to $16.54, and Meritage ( MTH), which rose 4.3% to $20.83.

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