Shares of Legg Mason Inc. wavered on Thursday, giving up morning gains that followed reports that an activist investor was seeking a bigger stake in the asset management firm.
Shares lost 28 cents to $24.20 in midday trading after climbing as high as $26.74 earlier in the day.
On Wednesday, the United Kingdom's Daily Telegraph reported that the investment firm owned by billionaire investor Nelson Peltz was looking to increase his stake in Baltimore-based Legg Mason to 20 percent from 0.5 percent. The newspaper cited unidentified "well-placed" people.
A Legg Mason spokeswoman declined to comment Thursday morning, calling the report "market rumors." A spokesman for Peltz's firm, Trian Fund Management LP, also declined to comment.
Later on Thursday, The Wall Street Journal reported that Peltz had not increased his stake in Legg Mason, citing unidentified people familiar with the matter.
The report Wednesday prompted a Deutsche Bank analyst to upgrade his rating on Legg Mason shares. Michael Carrier raised the stock to "Hold" from "Sell," saying "activist chatter" is likely to boost shares despite Legg Mason's fundamental weakness.
Carrier said activist investors may be targeting Legg Mason to either try to improve its margins, sell divisions or create a new firm altogether. He said each path carries significant risks.
"While we continue to view the fundamental story at Legg Mason as weak and expect any activist investors to run into significant hurdles in creating value, in the near term, we do expect this news to trump the fundamentals," Carrier wrote in a note to investors.
But J. Jeffrey Hopson, an analyst with Stifel Nicolaus, was skeptical that an activist investor would be successful at squeezing new value out of the firm, particularly given its high debt levels.
"Clearly, the presence of an activist investor can help spur more aggressive changes at the company, but an activist investor can't help the affiliates improve their investment performance," he said.
Last month, Legg Mason posted a wider fourth-quarter loss as it sought to eliminate its exposure to some risky assets. For the full year, it lost $1.95 billion, or $13.85 per share.
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