“That’s what makes the game fun, right?” he says.
But for the last two years, Mr. Bove has been engaged in a lonely legal battle to retain his ability to say whatever he likes, an ordeal that he says has been anything but fun. BankAtlantic, a Florida bank, sued him, accusing him of defamation after he wrote a report about the banking industry in July 2008, just as the financial crisis was starting to boil over. The bank contended that the report falsely suggested that the institution was in trouble.
The case was settled three months ago, and Mr. Bove didn’t pay a dime to BankAtlantic. Still, it was hardly a resounding victory for Mr. Bove or, for that matter, freedom of speech on Wall Street, where some say the need for independent, probing voices has never been more apparent.
Although Mr. Bove is among the best-known analysts on Wall Street, most of his colleagues deserted him after BankAtlantic filed its suit. None of the professional associations that represent analysts or the securities industry rallied to his side, and his employer ultimately abandoned him. And Mr. Bove, 69, is stuck with nearly $800,000 in legal fees.
“Even though from a legal standing I won, from a real-world point of view I lost big,” he says.
The Bove report that led to the lawsuit, titled “Who Is Next?,” ranked 107 bank companies from riskiest to least risky, using two financial ratios as benchmarks on two lists. BankAtlantic Bancorp , the publicly traded holding company that controls BankAtlantic, was ranked 10th on one list, 12th on the other.
Alan B. Levan, the chairman and C.E.O. of BankAtlantic Bancorp, has often clashed with disgruntled investors and critics in his 40-year career in Florida real estate and banking. He says he filed his suit against Mr. Bove to protect his bank’s reputation.
“In the last three years, every business in America has been under extreme pressure because of the economy,” says Mr. Levan, 65. “In that kind of a scenario, when rumors begin that are inaccurate or portray a business in a light that is not true, then, in times of stress, companies need to correct those misconceptions immediately because otherwise it can become quite dangerous.”
As it turns out, however, Mr. Bove’s rankings have proved to be largely correct. On the first set of rankings, 8 out of the 20 companies he said were most at risk have failed, and most of the others’ stock prices have spiraled downward and remain low. On the second list of rankings, 9 of the top 20 banks are gone.
BankAtlantic Bancorp’s stock trades at just under $1, down from its record high of $100 at the end of 2004. The company continues to struggle under the weight of its huge Florida real estate holdings, and some analysts say tighter banking regulations will only add to financial pressure at the company.
Maclovio Pina, a banking analyst at Morningstar, says BankAtlantic is likely to continue to struggle. “It’s a murky future, in our view,” he says.
While it is not unusual for bank executives to grumble about analysts, it’s highly unusual for them to sue. For one thing, many lawyers believe that it is hard to successfully sue someone over his or her opinions. It’s also a challenge to prove that a report from a single analyst actually hurt a company’s business.
But the BankAtlantic suit, closely watched in the banking industry, seemed to capture the angst that many bank leaders felt in 2008, when even some of the most venerable institutions faced the precipice.
Mr. Levan was not the only bank executive to blame others as his company’s stock tanked. A chorus of banking chiefs at the likes of Lehman Brothers and Morgan Stanley publicly blamed skeptics and investors betting against them as the reason their shares fell.
Few banking executives, however, have pushed their complaints as far as Mr. Levan.
IF Mr. Levan is sensitive about his bank, it may be because he built it from a sleepy savings and loan into Florida’s second-largest bank, behind BankUnited. He controls the bank and the holding company along with a small group of associates, including his son, Jarett Levan, who was named chief executive of the bank in 2007.
The ownership structure is complex: Alan Levan and his associates control a company called BFC Financial, which owns shares in BankAtlantic Bancorp, the company that, in turn, owns BankAtlantic. Mr. Levan and his associates control BFC and BankAtlantic through special classes of voting shares.