Multistring vertices and the overlap identities which they satisfy are
exploited to understand properties of hyperbolic Kac-Moody algebras,
in particular E(10). Since any such algebra can be embedded in the lar
ger Lie algebra of physical states of an associated completely compact
ified subcritical bosonic string, one can in principle determine the r
oot spaces by analyzing which (positive norm) physical states decouple
from the N-string vertex. Consequently, the Lie algebra of physical s
tates decomposes into a direct sum of the hyperbolic algebra and the s
pace of decoupled states. Both these spaces contain transversal and lo
ngitudinal states. Longitudinal decoupling holds more generally, and m
ay also be valid for uncompactified strings, with possible consequence
s for Liouville theory; the identification of the decoupled states sim
ply amounts to finding the zeroes of certain ''decoupling polynomials.
'' This is not the case for transversal decoupling, which crucially de
pends on special properties of the root lattice, as we explicitly demo
nstrate for a nontrivial root space of E(10). Because the N-vertices o
f the compactified string contain the complete information about decou
pling, all the properties of the hyperbolic algebra are encoded into t
hem. In view of the integer grading of hyperbolic algebras such as E(1
0) by the level, these algebras can be interpreted as interacting stri
ngs moving on the respective group manifolds associated with the under
lying finite-dimensional Lie algebras.