Spectrum Brands stock is sinking, falling to two all-time lows in the past two days, after The Thomas H. Lee Funds, the biggest shareholder, handed out nearly all of its 12 million shares to its investors.

Thomas H. Lee had held 22.85 percent of the stock of Spectrum Brands, parent of Madison-based Rayovac and Remington brands. Now, an activist hedge fund, Harbinger Capital Partners, and a Deutsche Bank fund are the biggest owners with more than 9 percent each, as of June 30.

Papers filed with the Securities & Exchange Commission this week said the distribution lets Thomas H. Lee's investors take Spectrum Brands shares as a tax loss. But that may not be the only reason, said John Nelson, investment director of small company stocks for the State of Wisconsin Investment Board.

"Maybe Thomas H. Lee just wants to get rid of this thing and be done with it because they don't see a bright future for Spectrum Brands. That's the $64,000 question," said Nelson, who does not follow the stock closely. He pointed to the fact that Thomas H. Lee did not come to the Atlanta company's rescue when it needed financing recently.

Spectrum Brands shares hit $1.54 in trading Friday, after slipping to $1.67, the previous all-time low, on Thursday. The stock has traded as high as $6.20 in the past year. Volume was high, with 2.2 million shares changing hands Wednesday, compared to an average daily volume of under 500,000 shares.

Nelson said that's probably a result of two factors: Thomas H. Lee investors selling the stock they obtained through the distribution and short sellers taking advantage of the sell-off.

Short sellers are investors who hope to benefit from a future drop in the stock price. "So they borrow the stock and sell it on the open market. After it drops, they buy back the stock at the lower price, and they've made a profit," Nelson said. Then the shares are returned to their owners.

Thomas H. Lee was key in the former Rayovac Corp.'s decision to buy United Industries in 2005, adding pet supplies and home and garden products and taking on the name Spectrum Brands. Since then, slower battery sales, rising raw material costs and a hefty $2.6 billion debt level have hurt the company.

An effort in 2007 to sell the home and garden unit failed. Plans earlier this year to sell the pet division to a subsidiary of Salton — in which Harbinger is also a major stockholder — also were scotched.

"The company is now better off with the three businesses than it would have been," had the pet unit been sold, BMO Capital Markets analyst Connie Maneaty wrote, in an Aug. 21 research note, and said an asset sale is unlikely now. But she maintained her "underperform" stock rating and $1.50 price target.

"Management is focused on preserving profitability in the face of unprecedented inflation" in the 2009 fiscal year, Maneaty wrote, and said "broad price increases" in the company's products are on the way.