This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Five Dumbest Things on Wall Street: July 31

No Slack for PennyMac

Investors that bought shares of PennyMac Mortgage Investment Trust (PMT) at Thursday's IPO price immediately lost money.

Like you should have expected anything different from these jokers?

PennyMac Mortgage, which buys distressed home loans and is run by a host of former Countrywide Financial bigshots, sold 16 million shares at $20 each to raise $320 million in an initial public offering this week, $80 million less than projected. The newly issued stock opened at $19 on the New York Stock Exchange, breaking syndicate on its very first day as a publicly traded real estate investment trust.

Bank of America's (BAC) Merrill Lynch division helped lead the deal along with Credit Suisse (CS) and Deutsche Bank (DB).

Bank of America bought home-loan originator Countrywide, whose co-founder Angelo Mozilo was sued by the Securities and Exchange Commission for concealing financial data from investors back in January 2008 for $4.1 billion. Countrywide's stock plummeted in value as a result of the credit crisis it helped create by selling subprime mortgages. Now those very same people who brought you the housing boom are trying to cleanup from the bust by purchasing loans from bad banks and redoing the terms.

Come on, all together now: What a country!

And the real Friends of Angelo are out in full force at PennyMac, too. The company's chief executive officer is Stanford L. Kurland, the former president and chief operating officer of Countrywide. Joining Kurland's executive squad are 10 other Countrywide alums, whose subprime loans, by the way, have suffered from a 39% delinquency rate, according to data compiled by Bloomberg.

PennyMac plans to charge a management fee equal to 1.5% of shareholders' equity plus an incentive fee that's one-fifth of profits above a certain level, says Bloomberg. In other words, it's a high-profile hedge fund run by Countrywide's finest, so there's a good chance they will make a ton of dough.

PennyMac investors, on the other hand, have no such guarantee.

Dumb-o-meter score: 80 -- A PennyMac for your thoughts? No thanks.

4 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ATVI $22.76 0.00%
BBY $38.48 0.00%
TTWO $25.26 0.00%
YHOO $45.10 0.00%
AAPL $123.25 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs