Shares of Bethesda, Md.-based Eagle Bancorp Inc. fell 24.49% to $49.95. Aurelius Value, a short seller, published a research opinion alleging that the company has been engaged in an insider loan scheme involving its CEO and some board members.
Aurelius Value claims that Eagle Chairman and CEO Ronald Paul used his own company to issue large preferential loans in exchange for cheap equity stakes in Eagle borrowers, citing undisclosed fraud suits filed by founders of two businesses co-owned by Paul. They allege that Eagle made over $180 million in loans to fund Paul's private real estate company through potentially illegal, undisclosed transactions. Aurelius Value also claims that a number of Eagle's independent directors received over $80 million in loans, some of which was allegedly also used to finance business ventures.
"In our opinion, insiders treat Eagle as their own private piggy bank," the firm wrote.
A representative for Eagle Bancorp did not immediately provide comment on the allegations.
Bank stocks broadly traded down Dec. 1, as investors worked through a noisy day of news.
In the morning, the U.S. Senate marched forward on its tax reform bill, as a number of Republican policymakers on the fence announced early in the day that they would be supporting the bill. With the support of Sens. Steve Daines of Montana and Ron Johnson of Wisconsin, Senate Majority Leader Mitch McConnell likely has the 51 votes needed to pass a bill. The GOP notably had to delay voting after Tennessee Republican Bob Corker failed to include a "trigger" that would pull back tax cuts if economic growth fell short of expectations.
A vote on the tax bill could come late Dec. 1.
But news of tax reform was quickly overshadowed by news of Special Counsel Robert Mueller's investigation, as former National Security Adviser Michael Flynn pleaded guilty to lying to the FBI about his discussions with the Russian ambassador. As part of the agreement, Flynn will cooperate with Mueller's office on further inquiry into possible Russian meddling in the 2016 presidential election.
Stocks traded down sharply by noon, but recouped some of the losses by market close. At the closing bell, the Dow Jones Industrial Average was down 0.17% to 24,231.59, the S&P 500 had declined 0.20% to 2,642.22 and the Nasdaq Composite Index had fallen 0.38% to 6,847.59.
"You're seeing the markets reacting to headline news," John Petrides, managing director and portfolio manager at Point View Wealth Management, said in an interview. Petrides said equities are particularly wary of what may actually be in the tax reform bill, if it passes. Negotiations between the House and the Senate could continue to reshape the bill's many provisions.
Other banks making big moves included Jericho, N.Y.-based Esquire Financial Holdings Inc., which increased 7.10% to $19.90, and Fort Lauderdale, Fla.-based OptimumBank Holdings Inc., which declined 4.98% to $5.91.
The larger banks had mixed movements in trading. JPMorgan Chase & Co. gained 0.26% to $104.79, Citigroup Inc. added 0.01% to $75.51, Wells Fargo & Co. declined 0.48% to $56.20 and Bank of America Corp. ticked down 0.25% to $28.10.
Westbury, N.Y.-based New York Community Bancorp Inc. decreased 0.60% to $13.26.
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