How to bury a subprime mortgage warning
If American Home Mortgage Investment Corp. makes a noise on a Friday night, and nobody is there to hear, does it fall?
The answer would seem to be yes. The mortgage lender’s shares plummeted 40 percent on Monday morning, after the company put out a press release at 10:19 p.m. EDT on Friday saying that it was writing down assets and receiving margin calls on credit facilities.
The move comes as the subprime mortgage bond market enters deep freeze mode amid a broad credit market pullback hitting everyone from newlywed home buyers to leveraged buyout artists.
There are sometimes fair reasons for putting out a press statement late at night before a weekend or a holiday. For example, parties may agree to a merger deal late at night, and may want to put out a statement immediately. Or maybe rumors are moving a company’s stock, forcing a release.
But timing a release for when people are unlikely to see it is a time-honored practice for companies hoping to evade scrutiny.
Buyout giant KKR & Co. LP filed for its IPO late on July 3 the day before the U.S. Independence Day holiday, in a move likely designed to minimize publicity for a sector that had received unwanted Congressional attention after Blackstone’s IPO. That move prompted this DealZone blog post.
American Home Mortgage has been a reluctant communicator in the past. On July 19, its shares dropped more than 20 percent on a rumor that one of its banks had withdrawn a credit facility. The New York Stock Exchange requested the company issue a statement indicating whether there were any corporate developments to explain the move, and the company declined to comment. The company was not immediately available for comment for this blog post.
Whether the company chooses not to communicate, or to communicate late at night, its shares are undoubtedly suffering–they were quoted on Mondy morning at about a fifth of their value at the beginning of the year.
(Photo: Reuters file)