NEW YORK – Hedge funds are known for playing hardball to boost their returns, and now they’re using those tactics on companies caught in the stock-option scandal.
Many of those companies – which include names such as Vitesse Semiconductor Corp., UnitedHealth Group Inc. and Medarex Inc. – decided to delay the release of quarterly financial reports while they investigated their option granting practices. Hedge funds say that means the companies are in default on bond covenants and want them to pay up.
While such demands are within legal limits, it could result in a big hit to some companies as they struggle to come up with enough cash to buy back the bonds.
That could mean more bad news for stockholders, who in many cases have already seen the value of their holdings plunge in recent months amid allegations that the grant dates of stock options to executives were manipulated to when share prices were depressed.
