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.