After months of defending its reputation against short-sellers, Olympic Financial Ltd. is preparing to launch a $120 million secondary offering of common stock.

Since the offering of six million shares was announced late last month, the stock price of the Minneapolis-based automobile finance company has jumped 27%, to more than $20 a share.

Olympic's shares garnered attention last year as investors and Wall Street analysts complained that its accounting and loan underwriting methods were too aggressive. There were concerns that the company would report higher loan losses as credit quality slid.

As a result, the company has frequently tallied the highest short interest position among financial stocks. According to First Call, there were nearly 4.8 million Olympic shares sold short as of March 15.

But during the last six weeks, short interest in Olympic shares has declined by 4.4%. One analyst said the recent run-up in the stock's price is likely the result of short-sellers covering their positions.

At the same time, the company has put some basic changes into effect. Among other things, it has adopted a far less aggressive stance on accounting for gains on the sale of loans.

Joseph Jolson, a specialty finance company analyst with Montgomery Securities in San Francisco, said Olympic Financial's more conservative accounting methods helped convince him last December to upgrade his investment rating to "hold" from "sell."

"Fundamentally, the company's story has improved," he said. "I'm not as worried about the company blowing up as I was."

In particular, Mr. Jolson noted that Olympic Financial built its reserves last year at a time when it could have reported higher earnings.

Instead of boosting earnings by taking advantage of the wider spreads between falling interest rates on two-year treasury notes and the sale price of its auto loans, he said the company took provisions against higher losses.

Still, the company was able to post earnings of 96 cents per share for the year, meeting most analysts' estimates.

Despite the changes, Mr. Jolson has refrained from issuing a buy recommendation on the stock because he says the price is too high.

"My price target on the company, based on 1996 estimates, would be in the high teens or the low 20s range, if you base it on next year's earnings outlook," he said.

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