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Countrywide Gets the Rumor Jitters

Management says no basis for accounting rumors

June 20, 2003


One of the nation's largest mortgage lenders Thursday took the unusual step of issuing a press release aimed at shutting down rumors.

Countrywide Financial Corp. issued a statement on its website at about 2:30 p.m. Eastern time, effectively putting an end to the stock-price slide that began at the opening bell, according to stock charts on Yahoo.com.

Wednesday, the company's stock closed at $74.46, according to Reuters News Service. Thursday morning it was $74.85 at the opening bell, Reuters said. Trading held steady as the stock price slid, falling below $69 shortly after 11 a.m, Reuters reported.

Coinciding with Countrywide's low today, the website Theflyonthewall.com posted a rumor which stated, "Countrywide Fin'l-CFC down on unconfirmed accounting rumors."

Within 10 minutes, the posting had made its way to a Yahoo Finance message board for Countrywide. The stock had already begun to rise.

At 11:47 a.m., Theflyonthewall.com had another rumor posting which said that the speculation wasn't true. By this point, Countrywide's stock was already back on the rise, and reached almost $72 by noon.

This post also made it over to the Yahoo message board, with about an hour of lag time.

Soon after, Countrywide issued a press release, which hit PRNewswire in the early afternoon, confirming that Countrywide had become aware of the financial rumors and stating that "Management firmly believes that there is no basis whatsoever for these rumors and stands behind the integrity of its accounting practices and financial statements."

Countrywide's share price closed Thursday at $70.81, down almost $4 for the day, Reuters said. Trading for Thursday was heavy, according to Yahoo finance charts.

A spokesperson for Countrywide said that the company was investigating to see if they could discover the source of the rumor, and noted that the rumor comes in close proximity to another industry player making headlines for actions concerning accounting irregularities. "The timing is odd," said Rick Simon, spokesman for Countrywide.

Secondary lender Freddie Mac fired its chief operating officer last week and replaced other officers in a flurry of activity last week surrounding the investigation into the government-sponsored enterprise's accounting practices. Freddie will be restating its 2002 earnings and is now facing class-action lawsuits related to actions taken during the investigation this calendar year.

According to a late Thursday afternoon report by Reuters, Countrywide's bonds also weakened on the rumors, with spreads widening 0.15 percentage point during the day. At the end of the day, the spreads had shrunk back to a .05 difference from Wednesday, Reuters said.

Anne Lineberry is MortgageDaily.com's editor. She previously worked as an online editor/producer for DallasNews.com and on the Metropolitan desk for the print edition of The Dallas Morning News. Email Anne at [email protected]

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