GAM Shares Go Into Freefall a Second Day After Warning on Loss

(Bloomberg) -- GAM Holding AG’s shares continued their downward spiral after the Swiss asset manager surprised investors with news of an expected record loss, as the fallout from the suspension of a star fund manager worsens.

The Swiss investment company said on Thursday it will post a shortfall of 925 million francs ($931 million) for the year after massive outflows forced it to write down the value of its business. The loss erases eight years of earnings since GAM went public. With assets and fees lower for the foreseeable future, the group is cutting 10 percent of jobs and also suspended dividend.

The shares traded down 22 percent to 2.79 francs as of 1:46 p.m. local time on Friday. The Zurich-based firm on Thursday saw its shares slump the most since the firm’s initial public offering in 2009 -- at one point slumping as much as 31 percent -- before ending the day down almost 22 percent at 3.58 francs.

“It’s pretty dramatic,” said Andreas Venditti of Vontobel. “The only thing that is missing now is that top portfolio managers would leave the company -- people who are responsible for important strategies such as emerging market bonds.”

The crisis stems from the suspension of bond manager Tim Haywood in July, following allegations of potential misconduct. That triggered a wave of outflows, forcing the firm to halt redemptions from his fund family and accelerating a slump in the stock. News of the freeze triggered withdrawals in other parts of the business, with clients pulling 4.2 billion francs in October and November.

“Despite the falls, we would be hesitant to call a floor in the share price,” Mainfirst analyst Daniel Regli wrote in a note to investors on Friday. He expects the asset manager to see a further 8 billion francs of outflows in the fourth quarter, substantially above consensus.

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