Short Sellers Bet Glenfed Stock Drop Will Continue

Glenfed Inc.’s stock has tumbled to less than $7 per share from $15.50 about seven months ago, but the Glendale-based thrift is still a favorite target for short sellers--investors who bet that stocks will fall in price.

Even the dreaded Feshbach Bros., the nation’s best-known short sellers, have a short position in Glenfed, the state’s third-largest savings and loan, mainly because they expect its portfolio of commercial real estate loans to cause problems as the economy sours.

Short sellers take a short position by borrowing shares and immediately selling them. They hope to make a profit by “covering” the shares--buying them back at a lower price and returning them to the owner.

Glenfed President and Chief Operating Officer Keith P. Russell Jr. said short sellers are overstating potential problems with the thrift’s commercial real estate loans. “We’re not losing a lot of sleep over them,” he said.

Other big California S&L; firms, such as Los Angeles-based CalFed and San Diego-based HomeFed, have also become a favorite target of short sellers.

But Tom Barton, a partner in Feshbach Bros., says the Palo Alto investment firm is pleased with its holdings in Glenfed, parent of Glendale Federal Bank. Barton said Feshbach Bros. started shorting Glenfed about seven months ago when the stock was “in the mid-teens,” and he thinks that the stock will go down further.

Glenfed’s stock closed Monday at $6.375 per share.

Barton is basing his expectations on troubles in Glenfed’s big $2.56-billion portfolio of commercial real estate loans.