Will BofA Up the Offer for Countrywide?

March 26, 2008 No Comments »

question

After JPMorgan Chase upped its offer for Bear Stearns from a measly two bucks to ten dollars in the space of a week, you have to wonder if the same change of fate could be possible for America’s number one mortgage lender.

Based on Bank of America’s closing price of $40.97 on Tuesday, Countrywide would be valued at $7.50 a share according to the original terms of the buyout.

But the Wall Street Journal noted that a large number of options traders have been making bets that the struggling mortgage lender would rise above that level in coming weeks, based on recent options contracts.

Unfortunately, there seems to be a glaring difference between the two deals as Bear Stearns investors kept pumping the stock above two dollars after the emergency rescue, while Countrywide investors could only manage a weak rally that fell short of the proposed bid.

Investors should also recall that Bear Stearns fell from around $90 a share to $5 a share in about a month, whereas Countrywide dipped from just under $9 a share to its current level.

If anything, the increased bid to buy Bear Stearns should give opponents of the buyout some ground to stand on, considering Countrywide was trading as low as $4 less than two weeks ago.

Shares of Countrywide were off 25 cents, or 3.98%, to $6.03 in midday trading on Wall Street.

(photo: bast)

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