WorldCom Bet Poorly Timed for Alliance

August 14, 2002 ( - There's a fine line between bargain-hunting and a poorly-timed buy - and once again Alliance Capital appears to have crossed the line in a visible fashion.

Citing a new regulatory filing, Reuters reported that Alliance snapped up more shares of WorldCom as late as June. The trades were executed just days before WorldCom’s massive accounting scandal erupted.

Added to its WorldCom stake accumulated since January 2002, Alliance moved into the second half of the year holding nearly 360 million shares, according to the report.
Alliance has already taken heat for buying shares in Enron as the energy trader tumbled toward bankruptcy.  In fact, the State of Florida has taken the fund manager to court after the state pension fund lost $282 million, which it said was due to Alliance’s Enron pension investments.

WorldCom Holdings

The New York-based Alliance Capital was the biggest shareholder in WorldCom at the end of May, with roughly 322 million shares, or 11% of the stock, Reuters said. Those shares were scattered across funds managed by its Sanford C. Bernstein & Co unit.

The money manager had ended March with roughly 210 million shares, regulatory filings with the US Securities and Exchange Commission showed.

The extra purchases in June show that Alliance Capital failed to cut its losses before the company’s downfall. Still, the small June bets were hardly costly ones – WorldCom had already fallen to $1.66 a share by the end of May.

Alliance said recently that its WorldCom holdings, while big, would not have an adverse effect on the company’s bottom line, although the firm has watched its own shares suffer as it deals with criticism over its Enron trades and other stock picks. The company’s shares have lost about a third of their value this year, according to Reuters

The investment manager also took heat for making other ill-timed bets on Tyco International Ltd. and Qwest Communications International before scandals clobbered those issues.