Wednesday, November 21, 2007

Marginalizing Bank Of America

If BoA were a trader in the pit, ball-breaking colleagues would be asking,

How much more CFC do you want?

CFC is Countrywide Financial Corporation, a ravaged mortgage lender. Look at its precipitous decline over the past five months from $40 to $9.56 per share as I type this.

As the stock was sliding towards bankruptcy, Bank of America made a $2 billion investment in Countrywide. The stake took the form of warrants (long term call options) with a strike price of $18. Roughly speaking, Countrywide shares were trading for just over $20 at the time.

Back when the news broke, I predicted that BoA would be buying more Countrywide - at a lower price (see my comments in this thread). As the stock is now south of $10, the "lower price" is available. Bank of America may be prohibited from buying more - I am really not up on all of the banking legislation. Regardless, they should have waited a few months and gotten a lower strike price.

1 comment:

Unknown said...

American liberals are braindead. They will complain about people coming home in bodybags, and then pay mortages, buy tvs, and pay rent to the zionist/neocolonial type scumbags that have poisoned the world with their destructive and denigrative ideologies, and the ones who have been syncronizing the world of bodybags for the past 50 years now.

I would rather be homeless then pay some zionist who thinks I am his goy or some neocolonial type bitch who thinks I should be her cheap monkey boy..

It is the neocolonialists who think they deserve government entitlements. They think that they are entitiled to cheap labor from their corporate governemnts.