What drove AHM American Home Lender to lose share price this past week?
skahhh asked:
When American Home Lender went to 34 cents a share was it because the stockholders sold their stock so that the price took a dive, on the news that the company could not make it’s margin calls or bond lenders calls to recoup their lending expenses?
If stock holders had held steady and not sold, would AHM be bankrupt now? And how did so many shares get sold so quickly? Isn’t that called market manipulation and isn’t that punishable by law through prosecution from the SEC? Where is the SEC in this?
Category: Investing | Tags: Home Lender, Lenders, Market Manipulation, Prosecution, Sec, Share Price, Stock Holders, Stockholders 4 comments »
December 18th, 2009 at 1:31 pm
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it went belly up. like about 50 other mortgage lenders. this is not
over yet so stay away from mortgage companies for now. as long as the shares where sold after the news was made public it is legal. i would watch out for countrywide next. they might be the next to go.
December 22nd, 2009 at 12:38 am
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over the past 4 years, people went crazy buying homes because the interest rates were so low.
because there were so many new home buyers, there were that many more people owing them money.
there has been a rash of forclosures in the past few months.
2007 marked the highest % of forclosures in history.
if nobody is paying back their home loan….. the company is going to go bankrupt.
December 23rd, 2009 at 9:48 am
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Investors in American Home Mortgage (AHMIQ – Cramer’s Take – Stockpickr) were dealt a nasty blow last week as their stock became the latest victim of a deteriorating credit environment.
The mortgage lender’s stock plunged 84% Tuesday on news it was considering liquidation. On Thursday the company abruptly announced it would shutter its lending business and lay off some 6,000 employees. The company filed for bankruptcy Monday. The stock, which traded over $20 in June, is now listed on the pink sheets with a value of roughly 35 cents.
While it may seem like cold comfort to investors who lost on it, the American Home Mortgage disaster offers some investment lessons. Learning from them may help in avoiding similar portfolio burns in the future.
While the deterioration of AHM surprised many, there were clues that trouble had been brewing. With the benefit of 20/20 hindsight, let’s first take a look back at the possible warning signs.
On June 29, the company pulled 2007 guidance and announced that delinquent payments would lead to a second-quarter loss. It was probably no coincidence that the announcement was made on a Friday. Shares dropped 12% on the news. The company was nonspecific about the reason for this pulled guidance — a definite red flag.
On July 18, the stock mysteriously went into a 20% free fall, and the NYSE asked the company for comment. Once again, management remained elusive, stating that it doesn’t comment on rumors. By the next day, the alleged rumor that Lehman was going to shut down the company’s credit line was widely published in the media. The company denied the rumor.
Despite the invalidity of the credit-line rumors, the stock price did not recover. Could some sellers have known that a bigger problem was looming? The lack of recovery in the company’s stock was a last chance for long investors to cut losses.
By July 30, the full truth was revealed that the company was buried in margin calls and would be unable to cover. Unfortunately, by then it was too late.
December 26th, 2009 at 5:24 pm
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The stockholders were blindsided. The New York-based American Home Mortgage mainly focused on borrowers considered good credit risks, but also extended many loans to people who could not document income or assets, AKA “Alt-A” mortgages, which fall between prime and sub prime in quality. Founded in 1987, the company said it had by 2006 become the 10th largest U.S. retail mortgage lender.
American Home announced that its own lenders cut it off, that it could not meet its escalating margin calls and that it might liquidate assets. It also stopped taking loan applications.
Because American Home Mortgage was not a predominately sub-prime lender stockholders had only one option, to sell as quickly as possible at the opening, to avoid more of a loss than was already in place. If anyone had had “insider” information that this was going to happen then the Securities Exchange Commission would certainly be investigating because certain stockholders that knew would sell off early while the price was still good.
I hope this answers your question, but if you need more information I have included the SEC website.