Jefferies looks like it’s somewhat back in order again after two public statements and vote of confidence from industry professionals.
After a rollercoaster morning — where the company’s shares fell as much as 20% and trading was briefly halted after the stock dropped below $10 per share — the investment bank closed the trading day at $12 per share – that’s down from the $12.27 close yesterday, but up from the $11.41 open this morning.
At one point, it traded at at a high of $12.66 per share around mid-day.
Shares are a bit down in after-hours trading, so nothing is for certain – but it’s been interesting to see how much investors have been spooked by MF Global ‘s collapse.
Jefferies’ had come under investors’ radar following MF Global ‘s bankruptcy on fears of European exposure for smaller financial firms – which are not as heavily regulated as big banks and do not have as much capital to fall back on. Then yesterday, ratings company Egan-Jones downgraded the firm to BBB- on fears of European exposure, which seemed to have caused the big sell-off this morning.
But since the low point, the firm has had a horde of supporters that helped push the stock back up to normal levels. Investment firm Leucadia National bought one million more shares of Jefferies today, perhaps to both take advantage of the lower prices and show that the company was confident in the investment bank’s stability.
Jefferies has also come out with two statements since this morning to clarify their European positions – where they say their $2.684 billion of European debt is offset by $2.545 billion in a short position, making their net exposure about $38 million. That’s about 1% of shareholder equity, whereas Egan-Jones said the $2.684 billion was about 77% of what shareholder’s held.
Another statement was issued explaining that the debt they held were in bonds, and not credit-default swaps, which some believe are unstable and much riskier.
Other industry professionals, such as analyst Meredith Whitney and Mendon Capital Advisors’ Anton Schultz, have come to Jefferies’ defence, citing the company’s conservative culture and aversion to risk, according to CNBC.
A bit more perspective – Jefferies’ stock is down about 55% YTD, it’s pretty big drop, but most big banks and financial firms have also seen share prices drop this year.