Citi Analyst Throws In the Towel On MBIA, Ambac

Includes: AMBC, MBI
by: Herb Greenberg

I thought I had seen it all until I saw Citigroup (NYSE:C) analyst Heather Hunt’s “throwing in the towel” report (thanks to Whitney Tilson for sending it) from Friday on MBIA (NYSE:MBI) and Ambac (ABK). She has been a long-time fan of both, but sliced them to a hold, citing volatility.

But that’s not what makes her comment noteworthy; rather her comments that she believes that “naked short selling” may be the culprit behind the declines in the shares of these companies.

She then refers her clients to claims of naked short-selling by none other than (NASDAQ:OSTK), whose stock was slaughtered after it bungled its business. “We do not know if ‘naked short selling’ is occurring with Ambac and MBIA shares,” she writes, “but if it were, it might help explain the significant volume and downward pressure.”

Or maybe, just maybe, investors are worried they’ll both lose their Triple-A ratings. You think? (Earth to Heather: Watch out for UFOs.)

For more depth on this story, check out Gary Weiss’ take on his blog. Gary has made a mini career debunking the world of wackos, including the “blame it on naked short-selling” crowd. And while you’re at it, don’t miss this take by Floyd Norris of the New York Times.