Lehman Brothersshares pared losses, but continued to trade lower Thursday, despite comments from trading partners that they continue to do business with the embattled Wall Street investment bank.
Officials from both SAC Capital, a giant hedge fund with more than $16 billion under management, and PIMCO, the world's largest bond fund, denied rumors that were circulating in the marketplace that they no longer wanted to take on additional exposure to Lehman.
SAC Capitaltold CNBC it "is continuing to do business as usual with Lehman."
SAC Capital spokesman Jonathan Gasthalter said rumors that SAC had stopped taking so-called counterparty risk, where it would no longer lend money Lehman - effectively pulling its credit lines - are "absolutely false."
Pimco Chief Investement Officer Bill Gross appeared on CNBC to refute the rumors that it has scaled back its business with Lehman.
"We continue to trade with Lehman," Gross said, "which means we accept them as a counterparty. We have investments in Lehman. In the last few months,when they've raised capital, we have been investors in Lehman."
In addition, PIMCO has not reduced its exposure to Lehman, Gross said.
Pimco, a unit of giant German insurer Allianz, has about $812 billion in assets under management.
Lehman's shares fell as much as 18 percent Thursday as the rumors spread, and while they recovered some ground, on SAC Capital and Pimco's comments, the stock was still trading lower.
Lehman declined to comment.
Gross said he believed Lehman and other financial stocks are trading more on the disappointing outlook for financial stocks rather than on concerns about their liqudity.
"Lehman and other investment banks have capital and have liquidity, but the problem really is the future of the business model and profitability, and that is why the stock price is going up and down, not based on PIMCO in its committment to Lehman," Gross said.
--Additional reporting by Christina Cheddar-Berk