Countrywide Worthless

Last summer I wrote two posts on Countrywide (CFC): Absurd CFC Rumor Presents Shorting Opportunity (August 21, 2007 with CFC at $21.79) and Why Countrywide is Done (August 28, 2007; $19.31).

My view then and now is that CFC is a zero barring a government intervention/giveaway like the Bear Stearns (BSC) deal:

I just saw something that makes me much more confident in my Countrywide short and put options position. The manager of Second Curve Capital appears to be a Countrywide sympathizer.

Wednesday in the WSJ I see that this viewpoint is continuing to take hold:

Investors remain skeptical that Bank of America Inc. will end up acquiring Countrywide Financial Corp. at the estimated $7.16 a share price agreed to months ago, and the company’s stock is continuing to sink in trading today.

Wednesday, Standard & Poor’s equity analysts chimed in, saying they believe Bank of America “will renegotiate a lower price due to large losses in CFC’s loan portfolio.” They value shares at $6 a share, on the expectations that the deal will be reworked.

In their research note An Involuntary Transaction: Why BAC + CFC May Never Close, Institutional Risk Analytics writes, "Given the outline above, our view is that the equity of CFC is worth $0."

Disclosure: I have no position in CFC but I own puts on a number of other lenders: BKUNA, CNB, COF, DSL, and SOV.

Comments

[Richard Weed:]

Was there a point to this "article"? I am not sure what the purpose of it is, other than to Countrywide bash like the rest of the print media. If you have nothing cogent to say, then don't say anything at all...

2008 May 12 05:22 PM

[Alex Meluskey:]

You have 5 puts in other lenders. Disclosure appreciated, but it makes your article worthless.

Keep in mind the government gives Bank of America credit for this type of a "rescue"

2008 May 15 12:09 PM