Stock in Tennessee-based Genesco Inc. is down nearly 11 percent today after the mall retailer revealed late yesterday that federal prosecutors had issued it a subpoena.
The shares rallied briefly early this morning, and then fell $3.27, to $26.90.
The move by the U.S. Attorney's Office for the Southern District of New York suggests the office has launched an investigation into allegations that Genesco hid financial problems before agreeing in June to be acquired by The Finish Line Inc. for $1.5 billion.
Genesco said the subpoena seeks documents related to the negotiations with Indianapolis-based Finish Line.
Finish Line and its financial backer, the Swiss financial giant UBS, have been trying to cancel the acquisition agreement, while Genesco has been trying to force Finish Line to close.
The three companies are battling in court in Tennessee and New York City.
Finish Line says it has the right to walk away because Genesco's financial results have declined dramatically since the deal was struck. UBS says it has multiple grounds to yank financing, including that Genesco management committed fraud. UBS charges that Genesco executives hatched a scheme "to sell their company before everyone knew that its financial condition was collapsing."
Genesco CEO Hal Pennington denied that allegation last week and did so again yesterday.
"These allegations are completely without merit and are simply part of UBS' litigation tactics to avoid their contractual obligations," he said in a statement.
Counting today's downturn, Genesco stock has lost about half its value since the acquisition was announced.