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Stock Analyst Sued for Negative Report

July 22, 2008 05:52 PM
by Denis Cummings
BankAtlantic Bancorp has filed a lawsuit against analyst Richard Bove for including it on a list of troubled banks.

30-Second Summary

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Richard Bove, a prominent stock analyst for Ladenburg Thalmann, released a report on July 13 titled “Who Is Next?” It looked at banks in the “danger zone” of failing like IndyMac, which was seized by the government two days before.

Bove created two lists ranking 107 publicly traded banks. BankAtlantic was ranked the tenth most likely to fail on one list, and twelfth on the other. However, Bove did not deem BankAtlantic to be in the “danger zone” and didn’t comment on the bank in his report.

BankAtlantic objected to the report, claiming that, by using data its holding company—BFC Financial Corp.—in his calculations, Bove had misstated the bank’s financial position. “He only examined holding company data which, in at least our case, is meaningless information,” BankAtlantic Chairman Alan B. Levan said in a press release. “This is simply shocking.”

BankAtlantic will have a difficult time winning the case, which will hinge on whether it can prove that Bove acted with “actual malice” in his report. BankAtlantic has sued for defamation before; in 1996, it won a $10 million lawsuit against ABC News for airing details about a real estate deal on “20/20.” The decision was later overturned when an appeals court ruled that ABC did not exhibit actual malice.

BankAtlantic might not need to win the lawsuit for it to be successful. The bank’s stock plummeted following the report, and it may have encountered problems similar to IndyMac, which was plunged into a liquidity crisis after N.Y. Sen. Charles Schumer released a letter detailing its risks. After the lawsuit was announced, shares of BankAtlantic rose 12.5 percent Monday.

Headline Link: BankAtlantic sues Bove and Ladenburg Thalmann

Background: The ‘Who Is Next?’ report and BankAtlantic’s response

Opinion & Analysis: What effect will the lawsuit have?

Historical Context: BankAtlantic’s previous defamation lawsuit

Related Topics: Company/analyst conflicts

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