This Game is so Rigged

M/I Homes: Over-Punished by the Markets

My belief is that there is zero value in the common. The bond holders and pref-A will most likely get all their money back. I, however, will cover between $3-5 per share; because this stock is so lightly traded - heavily shorted - and easily manipulated upward. If the stock hits $20 again - I'll short more.

Incidentally, I just paid the dividend yesterday (for ex-div 6/27). What a bargain for the shorts!

M/I Homes: Over-Punished by the Markets

Yes Saj,

My belief is that management is not marking real estate to market (as in the case of a bankruptcy sale). Just to where they believe it's "properly valued". Additionally, $100MM of that book value was "artificially" created when they diluted your common shares with Pref-A. My opinion is that they will "create" another $50-100MM of "book value" with another dilution.

Many smart people have been arguing that this isn't a book value story; but a cash flow story. To which I respond, after they produce the cash flow to cover their $160MM of annual SG&A - and burn through all their dirt - what do you own as a shareholder?

They're borrowing your money at 10 cents a share dividend (which is why I don't mind paying your dividends for you) while the stock moves down from $40 to $14.

M/I Homes: Over-Punished by the Markets

Saj, the problem is that $40 (not $50) of real estate on the books was primarily puchased between '04 and '06 - currently dirt trades at about .35 on the dollar (so let's be generous and say book is $16). However, the pref-A eats another $7 of that. And the next dilution (which also "increases" book value) - drops the common book to about $9.

I'll cover my short at $5.

M/I Homes: Over-Punished by the Markets

My work shows razor thin margins and a loss of $5 per share this year. With almost no cash (after burning through the $100MM pref from last year); I expect another dilution shortly.

In my opinion, this is the worst of all the home builders. No upside because of limited footprint - and bk on the downside.


Disclosure - I'm short of MHO