Trading of Gerova Financial Shares Halted by NYSE

Last Wednesday, the New York Stock Exchange (NYSE) announced that it had elected to halt trading in shares of <"">Gerova Financial Group, Ltd. pending disclosure of additional information relative to its operations, management restructuring and business plans. The NYSE announcement followed several weeks of bad press for the Bermuda-based reinsurer.

In January, Gerova announced that it had hired Kroll, an intelligence and risk analysis firm, to investigate the authors of a recent critical report issued by Dalrymple Financial LLC where it characterized Gerova as a “shell game” that “has many hallmarks of a classic fraud.”

The key concerns raised by the Dalrymple report included: complete lack of financial disclosure; impaired and overvalued assets; undisclosed related-party transactions and affiliations; strong ties to the investment underworld; and many hallmarks of a classic fraud.

The news caused Gerova stock to fall $2.98 or 11 percent, to close at $24.32.

The news of the Darymple report, and Gerova’s reaction to it, was followed on February 10 by the company’s announcement that four board members and its President had resigned and that Dennis Pelino would be appointed president and CEO. But less than week later, Pelino withdrew his name from consideration. These revelations caused Gerova shares to fall $9.31 or 60% for four straight trading sessions, to close at $6.39 on February 16.

A week before the NYSE halted trading of its shares, Gerova Financial said it had been contacted by the exchange over unusual trading activity in its stock.

The day trading was halted, shares of the company on the NYSA had closed at $5.28.

The fallout from the Gerova Financial’s troubles continued on Friday, when broker-dealer Ticonderoga Securities and London-based investment bank Seymour Pierce both announced they had ended merger talks with the company. Gerova Financial had struck deals in December to buy both firms.

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