Here’s all you really need to know about Novastar (NFI) in the wake of its third-quarter report Tuesday: In a somber-sounding press release, the company mentioned impairments, a higher loss provision and higher reserves for its mortgage securities portfolio: higher “loss assumptions.”
All of this translates into increased concerns for the company’s dividend – or so says former bull Scott Valentin of Friedman Billings Ramsey, who cut his rating and price target “to reflect the increased risk premium we believe investors will require, as 2008 dividend levels may come into question.”
It’s now beginning to make sense why the company in September hired Cantor Fitzgerald, rather than its normal bankers, to quietly handle the placement of shares rather than its usual course of doing big-bath a stock offering in a market not eager for shares in a subprime lender. As it turns out, it appears the company sold around $40 million shares, giving the company yet enough cash to keep out of trouble.
If you recall, short-sellers have argued the company doesn’t earn its dividend. The company has insisted it does.