Countrywide’s multiplier effect…
It’s been a few months since we last checked in on the sex party house a stone’s throw away from where I used to live in Holmes Beach, Fl. that we first footnoted last November. The house, which was once listed at $1.8 million and which Countrywide Financial (CFC), which is set to be acquired by Bank of America (BAC) later this month, foreclosed on for around $1.1 million, is going on the auction block next month. The starting bid? A mere $369,000.
When I drove by the house back in February, I was in shock that anyone would have valued this house at over $1 million. On Countrywide’s own REO site, the price has dropped to $729K, nearly 20% below the $904K it debuted on the site for.
When you start multiplying that kind of loss by the over 1,400 Florida properties that Countrywide currently lists on its site — the folks at this site make it easy to see the initial prices and the current ones — you have to wonder whether Bank of America really knows what it’s getting into. And then multiply that by the foreclosed homes in other states. Given the spike in short interest in Countrywide shares — 102.45 million as of May 12, compared with 76.43 million a month earlier — it’s clear that there’s some people betting that this merger may be DOA.
Later this week, I’ll be heading down to Miami. The last time I was there, back in mid-2006, I asked the Miami Herald’s real estate reporter who was buying all of those high rises I saw going up as I walked south along the boardwalk from my hotel. It will be interesting to see what that area looks like today.
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June 3rd, 2008 at 11:32 am
Ok maybe we can debate about whether BofA is getting a good deal. But it is clear they are not backing out. They have issued an offering document to CW shareholder for the exchange of thier shares into BofA at the agreed upon ratio. I don’t understand why there are still people out there saying BofA will back out or reprice. If this were the case the exchange offer would not be out there. Get a clue. The deal is moving forward.
June 3rd, 2008 at 11:48 am
If memory serves me, there have been other cases of offering documents being issued and deals still not going through, although I can’t seem to name them off the top of my head, or readily find them via Google. If anyone can come to my rescue here, I’d be very appreciative. There’s even a reward: I’ll send the first person who responds a signed copy of Financial Fine Print.
Thx!
June 3rd, 2008 at 11:58 am
You are right, it could still not go through but that would be up to the Countrywide shareholders who have to vote. It is no longer BofA’s choice. They are locked in, having extended the exchange offer.
June 3rd, 2008 at 5:56 pm
By coincidence, I just saw this list in Marc Hulbert’s column, which includes Reddy Ice (FRZ), Sallie Mae (SLM), 3Com (COMS) and a few others.