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March 6, 2008
Ambac Turns Anxious
Commenting on the massive equity offering at a near record low share price level, Ambac Chairman and CEO, Michael Callen, said yesterday, “In this offering, we are targeting our core investor base, the long term holders of our stock, who have been loyal to Ambac.” Although obviously not intended, this is kind of like saying we are further screwing over our core investor base by heavily diluting the stock because we completely failed to grasp the severity of ongoing crunch.
Fortunately, with Ambac’s stock price more than 90% off of its 52-weeks highs and $8+ billion in market cap already erased, many long-term shareholders have already packed it in. As for the 59 shareholders of record in Ambac’s latest 10K, they were unable to breath easier following yesterday’s announcement because the expected size of the deal is considerably less than the $3 billion the company was reportedly gunning for. Moreover, the rating agencies, which are expected to affirm Ambac’s ratings, are nonetheless not expected to remove the company from their negative watch following yesterday’s announcement..
In short, the equity/rights offering is a disappointment not only because the company failed to cleanly attract capital from a SWF or someone like Wilbur Ross, but also because after January’s failed equity offering* a consortium of banks has been trying to orchestrate a bailout for Ambac (and themselves). In other words, after weeks of brainstorming some of the most sophisticated financial minds came up with the following: public offering. Wow.
*Jan 22, 2008: Ambac Chooses Not to Raise Equity Capital under Current Market Conditions
Jan 16, 2008: Ambac Announces Capital Enhancement Plan to Raise in Excess of $1 Billion
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