Aug. 1 (Bloomberg) -- Shares of Beazer Homes USA Inc., the homebuilder facing investigations by the FBI and securities regulators, plunged the most ever on speculation the homebuilder may file for bankruptcy.

``We do not know where these scurrilous and unfounded rumors started,'' Beazer said in a statement.

Beazer's shares fell $2.51, or 18 percent, to $11.48 at 4:17 p.m. in New York Stock Exchange composite trading, after earlier dropping as much as 42 percent to $8.10. They're down 76 percent this year. A Standard & Poor's homebuilder index was little changed after earlier falling as much as 8.5 percent.

Atlanta-based Beazer last week reported a net loss of $123 million, or $3.20 a share. The company's revenue has fallen three consecutive quarters and in the most recent quarter was at about the level of 2003. The worst housing slump in 16 years has left eight homebuilders nursing losses of $1.97 billion and expenses of more than $3.1 billion as property values fall and land purchases are abandoned.

The company said last week it entered into a four-year $500 million revolving credit agreement and it expects to end the year with more than $300 million in cash.

`Ado About Nothing'

``We're confident that what's going on today is much ado about nothing,'' said Joseph Snider, a senior credit officer at Moody's Investors Service in New York. ``If anything, they're more liquid than they were before and they're coming into their fourth fiscal quarter of the year, where they generate the most cash. So we think it's just a bear raid on the company.''

No bankruptcy filing for Beazer was found in a check of court dockets in Atlanta where the company is based, or in New York or Wilmington, Delaware.

``We're hearing Beazer is supposedly going bankrupt,'' said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages $5 billion in San Antonio. ``If in fact that comes to fruition, the market's going to be in a world of hurt.''

The Federal Bureau of Investigation said in March it was investigating Beazer for potential fraud after the Charlotte Observer newspaper reported the company sold homes to low-income buyers who couldn't afford them, financing the purchases with mortgages based on expectations the borrower's income would rise.

The company said last week that the Securities and Exchange Commission had launched a formal investigation.

Beazer's Bonds

Beazer's $350 million of 8.38 percent notes due 2012 fell 6 cents on the dollar to 78 cents, according to Trace, the bond- price reporting system of the NASD.

``The fear is pretty palpable,'' said Eric Landry, an analyst at Morningstar in Chicago.

The perceived risk of owning Beazer's bonds rose today as credit-default swap investors boosted the amount they demanded to take on the risk that Beazer will default on its debt.

Sellers of Beazer credit-default swaps are demanding $2 million upfront and $500,000 a year to protect $10 million in bonds, according to CMA Datavision in London. That's up from $1.8 million upfront and $500,000 a year earlier today and $530,000 a year at the start of July, CMA prices show. Credit- default swaps are used to speculate on a company's ability to repay its debt or hedge against the risk they won't.

`Some Speculation'

``There's some speculation Beazer Homes may be in some sort of trouble, although it's uncertain whether it is financial or legal,'' said Michael Malone, a trading analyst at Cowen & Co. in New York. ``There's very little known at this time.''

Moody's Snider said that as of the quarter ended in June, Beazer had more than $100 million in cash and the untapped $500 million revolving credit facility that may give them more borrowing capacity than a $1 billion revolving facility it replaced, which had tighter borrowing restrictions.

Shares of Red Bank, New Jersey-based Hovnanian Enterprises Inc. fell $1.29, or 9.7 percent, to $11.95. Shares of Scottsdale, Arizona-based Meritage Homes Corp. tumbled $1.25, or 6.4 percent, to $18.25. Shares of Irvine, California-based Standard Pacific Corp. fell 82 cents, or 5.5 percent, to $13.99.

To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Brian Louis in Chicago at blouis1@bloomberg.net.

Last Updated: August 1, 2007 16:26 EDT