Linn Energy LLC shares fell 15 percent to a near three-year low after the oil and gas producer said regulators began an inquiry into the company and its affiliate LinnCo LLC about their proposed buyout of Berry Petroleum Co and other financial activities.
Shares of LinnCo, which went public in October, were down 11 percent, while those of Berry were down 6 percent.
Two brokerages downgraded the Linn Energy stock, with a Raymond James analyst saying the informal investigation will delay Linn's takeover of rival Berry by "at least 30 days."
Linn Energy, which proposed to buy Berry for $2.5 billion in stock in February, said the impact of the inquiry on the timing of the buyout was difficult to predict.
The deal was earlier expected to close soon after Linn Energy shareholders' meeting, scheduled for the third quarter ending September.
The U.S. Securities and Exchange Commission has asked the company to save documents related to the merger, hedging strategy and use of non-U.S. generally accepted accounting principles, or non-GAAP, measures, Linn Energy said.
"... It will not take the SEC very long to come to the same conclusion we did, which is that the company's accounting is in good order and represents the company's overall health," said Raymond James analyst Kevin Smith who downgraded the stock to "outperform 2" from "strong buy 1".
Linn Energy shares were down 14 percent at $28.61 in morning trading. The stock, which touched a low of $28.33, was one of the top percentage losers on the Nasdaq.
(Reporting By Garima Goel in Bangalore; Editing by Maju Samuel)