So, MBIA (MBI) has now gone as far as to ask Congress to “reign in” Bill Ackman. I thought it was a joke until I actually read it.
First things first. I am going to come to the defense of Herb Greenberg. Anyone who read here knows Herb is not one of my favorite bloggers after his “Worst CEO” post on Sears Holdings (SHLD) Eddie Lampert. That being said, if I am going to jump on someone when I think they are “out there”, I should do the same to others when they are.
Herb wrote a column today about the MBIA and Ambac. To me, the article made perfect sense but reading the comments, you would have though Herb just made the whole thing up. Odd
Let’s go back. Ackman first began shorting the two in 2002. Now, the media constantly says Ackman has shorted MBIA and Ambac when in actuality, he has said countless times he is short the Holding Companies of both organizations. The Holding companies rely on funding from both Ambac and MBIA. Ackman’s bet is that the insurance regulators will require both company’s to suspend dividends to the holding companies so they are able to meet their capital requirements thus starving the holdings companies of income and initiating their extinction.
MBIA actually declined to have an open phone on their last earnings call. They instead chose to take type questions to answer. This was done to enable them to cherry pick which questions to answer and which to decline.
Here is the thing, has anything Ackman said would happen not? Has there been any insider buying in shares of either company? Has management come out and done anything to prove him wrong other than call him names?
Haven’t folks like Warren Buffett and Wilbur Ross looked into both organizations and said, “we’ll pass”?
I am having a hard time thinking of the last time Ackman exited an investment on the losing end. Management at both companies can do one thing to prove him wrong, produce results contrary to his predictions. To date, they haven’t.
Disclosure (“none” means no position): None
4 replies on “MBIA and Ambac: Wow”
Todd,
Ackman has repeatedly explained that he is short the holding companies, long puts and long CDS on both Ambac and MBIA. The distinction between the holding companies and the insurance subsidiaries is critical for the purposes of investment analysis. However, isn’t the media correct when it reports that Ackman is short ABK and MBI (i.e., don’t ABK and MBI constitute the holding companies and isn’t Pershing Square short these securities)? To my knowledge, the insurance subsidiaries don’t trade as common stocks, so Ackman’s explanation that he is “short the holding companies” is a bit misleading (as the only securities issued by the companies in the form of common stock eligible for shorting are the holding companies themselves, not the insurance subsidiaries). Is my understanding of this correct? Thank you.
Anon,
go here:
http://www.yousendit.com/transfer.php?action=check_download&ufid=C23E4C367F887582&key=7797b1e8539af08f8cee5e42e5e318f93d80b48e&bid=Mmd0UXVuQzMzeUxIRGc9PQ)
ackman explains it better than i could… 🙂
Todd,
Thanks for the link. It appears that I am correct that Pershing Square is short ABK and MBI. Why he continues to qualify that he is “short the holding companies, and not the insurance subsidiaries” is a bit baffling, as shorting the insurance subsidiaries isn’t possible (unless a private market exists to execute such a trade).
I’d bet on Ackman and Jim Chanos, not Marty Whitman or Warburg Pincus, in this battle.
i think he does that to make sure people know the difference. the holding companies have no business without the insurance subs. that is his point.
if the insurance subs are required to suspend the dividend, the holding company become worthless as it has no income..
i think he is just trying to point that out to people.