BofA just bought Countrywide for $4 Billion in stock. That equates to around $7.17 per share, but it’s a stock deal. I guess BofA used up all their cash buying that Countrywide at $16. CFC’s down a little in pre-market trading.
January 11, 2008
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This seemed like an obvious outcome when they did the deal last summer. But how about that stock going to 5. Wow.
Comment by High Plains Trader — January 11, 2008 @ 1:53 pm
Actually, the market was blindsided about this until right after the rumour of bankruptcy. Even though BofA had invested in CFC, most thought it was a bad deal, and the BofA’s board was worried about the bad trade they made. We’ll see how BofA digests this trade through their stock price. Personally, I think that it’s a good fit for BofA’s retail end, but nobody is certain about the potential liability they might inherit….I don’t think anybody knows that. This deal couldn’t have gone through 10 years ago, or one year ago, for that matter. The anti-trust guys would have been all over that deal.
Jeff
Comment by masteroftheuniverse — January 11, 2008 @ 2:17 pm
I don’t really care about CFC and BAC all that much because neither is fundamentally exciting or a great trade at this point, but I did go long the leveraged financials bull ETF this morning on the Canadian side. Canadian banks are a quasi-monopoly here, and there are a number of pretty good other financial companies as well. I took my proper reversal signal, and I think we’re going to get a pretty good move here. Two of the banks are mildly pungent, because they still have some writedowns to report (BMO and CIBC), but the rest are pretty solid, paying good dividends, and are the go-to stocks for all Canadian fund managers and conservative investors. I think you can get 20% - 30% out of this trade within a month (using the 2x leverage of the ETF.) It is already going in the right direction from the open.
I think the U.S. financials will pop as well on all this consolidation activity, but I think Canada’s a bit stronger there. One to keep an eye on is state-side is Thornburg (TMA). They have a high-quality loan and ABS book, but their issue is financing it. They would be a good take-over for someone. I sold it higher up to fit a short ETF, but still keep it on the rader.
That’s my sorry story for the day and I’m sticking to it (with a 5% stop).
Cheers,
George
Comment by George Parkanyi — January 11, 2008 @ 5:21 pm
George,
You’re lucky to even have ideas regarding the equities. I’m in a state of confusion. Kind of like writer’s block…I’ll call it trader’s block.
Jeff
Comment by masteroftheuniverse — January 12, 2008 @ 5:39 am