Rumors spread like wildfire today that American Home Mortgage Investment Corp.'s mortgage operation had lost a key Wall Street credit line -- a rumor that appears to have caused the company's stock to tank more than 20 percent in a single day. Reuters reports:
In a statement on its Web site, the NYSE said it had requested American Home Mortgage issue a statement indicating whether there were any corporate developments that might explain the share price move. Steven DeLaney, a managing director at JMP Securities in Atlanta, who spoke with the real estate investment trust's chief financial officer, said American Home assured him the rumor was false. "The company had assured us that no credit facility has been pulled," DeLaney said. Bose George, an analyst at Keefe, Bruyette & Woods in New York, said the company's CFO also assured him the rumors were false.
Maybe this will all be proven to be a false rumor -- and if so, it's a strong sign of just how jittery investors really have become. (A 20 percent drop on unfounded rumor isn't exactly a common occurence.) But I have to admit that if I were a C-level executive at AHM, I'd have been rushing out the door as fast as I possibly could with a public explanation that everything was fine and that no credit line had been pulled -- it's the quickest way to quell a rumor a like this and protect the company's market cap, especially if the rumor in question doesn't have legs. Here's exactly what I wouldn't have done: spent my personal time during a company crisis in private conversations with a few analysts and then left an NYSE inquiry into the price drop hanging out there any longer than absolutely necessary. Update: AHM stock rebounded nearly 5 percent in after-hours trading.