Magazine article American Banker

PaineWebber Shares Tumble as Takeover Rumors Subside(Brief Article)

Magazine article American Banker

PaineWebber Shares Tumble as Takeover Rumors Subside(Brief Article)

Article excerpt

PaineWebber Group Inc.'s shares plummeted more than 7% on Monday as speculation that the company would be acquired cooled down.

On Friday, PaineWebber's shares skyrocketed 17% at the end of the day, convincing many that the country's fourth-largest brokerage firm was about to be snapped up by either a commercial bank or larger brokerage firm.

Market observers at the time postulated that possible bank acquirers were Chase Manhattan Corp. or J.P. Morgan & Co.

"When everyone knows about a prospective deal like the price and the acquirer, chances are nothing is going to happen," said one market expert on Friday, when PaineWebber's stock was hovering at a dizzying $41. "But no one knows anything at all, and the stock price is soaring in the secondary market, you got to wonder if it's true."

When no deal materialized, Paine Webber's stock fell $2.50, to $38.50 - on heavier trading than had swept it to its 52-week high on Friday.

No clear-cut explanation has emerged as to why investors believed a merger was so imminent, but market observers agreed that the intensity of the speculation came at a time when the brokerage firm rumor mill has been relatively quiet. The last rash of rumors occurred directly after Travelers Group Inc. agreed to buy Salomon Brothers Inc. in late September. Then, on Oct. 8, Paine Webber's shares surged 8.3%, as investors speculated that Goldman, Sachs was about to acquire it.

Economic turmoil in Asia and uncertainty about how it would affect trading revenues-particularly of brokerage firms-eventually muzzled most- rumor mongering, as investors focused on more bottom-line issues. …

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