WSJ: Countrywide facing FBI investigation
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Breaking news: The Wall Street Journal reports that Countrywide Financial is under investigation for ‘possible securities fraud’: ‘The Federal Bureau of Investigation is probing sub-prime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives.’
More: ‘The inquiry involves whether company officials made misrepresentations about the company’s financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized.’
The Journal quotes a Countrywide official saying the company is unaware of an FBI investigation.
Published reports have said Countrywide and its chairman, Angelo Mozilo, face several other investigations but the words ‘possible securities fraud’ bring the issue to a new level. Potentially, a much worse level for Countrywide. At some point these investigations begin to pose a risk to Countrywide’s possible* future owner, Bank of America. With that in mind, it will be interesting to watch the two stocks Monday, to see whether investors begin betting that the Bank of America takeover will not happen.
Update: I’ve taken a stab at the math, and by that math, Countrywide closed Friday at a 24% discount to the Bank of America offer -- hardly a vote of confidence in the deal. Feel free to correct me or second-guess me. Here’s my math: the Bank of America offer is .1822 B of A shares for every Countrywide share. B of A closed Friday at $36.74, which gives the offer a value of $6.69. Countrywide, however, closed at $5.07, a discount of 24%.
*Why just ‘possible’ future parent? Because the deal isn’t done, and because some of you have predicted here that it won’t get done, and you folks have been right often enough that I listen to you.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
Hat tip: MBob via comments.