Avoid The Pending Bad News From Chimera Investment Corp. Sell The Shares Now

May. 6.12 | About: Chimera Investment (CIM)

In mid-March mortgage REIT Chimera Investment Corp. (NYSE:CIM) announced the company's year-end financial reports would be delayed because the company had fired its auditor and hired a new one. At the time of the announcement the company stated it expected to " file its 2011 Form 10-K as soon as practicable" and the Form 10-Q for first quarter results within 60 days of filing the 2011 year-end 10-K.

It has been nearly two months since that press release and there has been no update or additional statements from Chimera. Most publicly traded companies have already released their 2012 first quarter results and investors are still waiting for year-end numbers from Chimera. Last year, Chimera announced first quarter results on May 5.

Historically, when a company delays the reporting of financial results, when those results do come out they are invariably bad news. In most cases the company will not give any warning of the bad news until the delayed 10-K or 10-Q is filed. Investors holding shares of Chimera may be best advised to sell the shares now and hold on to the cash until the 2011 final results are finally released. If there is bad news, having the money in cash will avoid the possible large share drop and may even provide a buying opportunity for those who still like the stock. If, when the news finally comes out, is not bad news the share price will probably not vary much from the current trading range.

One final note for Chimera Investment investors. Last year the company announced the second quarter dividend payment on June 20, about six weeks after the first quarter earnings release. It is difficult to forecast the ongoing dividend level without financials to work from.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.