Frontier Bank denies speculation about buyer
Published 7:55 pm Tuesday, April 27, 2010
EVERETT — Frontier Financial Corp. will not be acquired by an investment group called Infinite Freedom Foundation, bank officials said in a statement released Tuesday.
The statement came on the heels of rampant speculation online about the future of the troubled bank, which regulators have ordered to recapitalize or face a forced sale.
The short statement read: “Management of Frontier Financial Corp. recently learned of rumors on the Internet on (Monday) that an investment group called Infinite Freedom Foundation was in the process of making a bid for Frontier. Frontier’s President and Chief Executive Officer Patrick Fahey said that while normally he would not as a matter of company policy comment on rumors, given the recent speculation on the Internet and elsewhere, he advises that to the company’s knowledge there is no basis for the rumor.”
Fahey has been seeking a white-knight investor to rescue Frontier from a forced-sale situation. Plagued by a portfolio of bad real estate loans, the bank showed signs of stock-market volatility recently.
After two days of skyrocketing share prices, Frontier Financial Corp.’s stock settled down Tuesday, trading at $4.95 when the market closed.
The 15.82 percent drop followed two days that saw the Everett-based bank’s stock more than double in value. That kind of volatility is uncommon but not unexpected among troubled banks under close regulator scrutiny.
Numbers from the Nasdaq stock exchange shed some light on what might be responsible for recent soaring stock prices at Frontier: short sales.
According to Nasdaq research, there were nearly 1.13 million shares of Frontier’s stock with short-sale status as of April 15. The bank’s daily share volume was just short of 406,900.
A short sale occurs when a trader sells stock that has been borrowed from a broker — stock the seller does not actually own. The seller must eventually buy the stock back to repay the broker, ideally at a lower price.
If the gamble isn’t paying off and the stock goes up in value after the short sale, traders might rush to buy shares before the cost increases.
Read Amy Rolph’s small-business blog at cmg-northwest2.go-vip.net/heraldnet/TheStorefront. Contact her at 425-339-3029 or arolph@heraldnet.com.
