Sallie Mae, A Buyback Gone Bad & Apple Bites
A stock buyback gone bad and those three little words .. your under investigation..
Sallie Mae, #1 US student lender, said its Q4 loss totaled $1.6 billion vs $18 million profit last year...
including a $1.5 billion loss on an equity forward derivatives contract.
The results also included $575 million in loan loss provisions, shares down 8% on the news and 71% in the last year.
Sallie Mae has said it will become more selective in the loans it makes, halting private student loans, which aren't backed by the federal government.
Sallie is eliminating 3% of its 11,000 workforce, cutting 20% of its operating expenses and completed the sale of $2.9 billion in stock, at $19.65 a share.
$2 billion of the proceeds being used to pay off its share buyback contracts. Sallie Mae had entered the contracts betting the price of its shares would increase.
Instead, the price declined. Oh and... the company said the SEC is investigating stock sales of directors and executives around Dec. 2007.
Apple bites... its iPod shipments missing Street expectations.
The company also issued Q2 guidance below the consensus estimate, stock punked 18%.
Gene Munster, an analyst at Piper Jaffray: "IPod growth rates have been declining for 10 quarters and that is alarming people.
There's just a nagging fear that a slowdown in high-end consumer spending will impact Apple."
The Nattering one muses... there are much larger issues than Ipods to be "alarmed" about...
According to Merrill Lynch data... the cost of bonds and loans used to pay for buyouts has doubled since June.
We have often Nattered about the fate of LBO leveraged buy outs and stock buy backs when the chips are down.
Jeremy Grantham concurs: Private equity "is the most underappreciated risk of all and is likely to be the center of another phase in the crisis.
Don't be a hero. Move to cash and let the other guys fish around for the bargains in the wreckage. This is the most important U.S. financial crisis since World War II.
The S&L crisis was parochial in comparison. This is the first one that is global; it has tentacles everywhere. There are plenty of bad things left in this cycle.
Private-equity deals will be in trouble. They were under-researched and over-leveraged,
and we had reached a level where the junkiest possible companies were selling at high prices."
Junk selling at high prices, sounds like the real estate market to me and looks like a reversion to the mean is already underway. Hattip to Bloomberg.
Sallie Mae, #1 US student lender, said its Q4 loss totaled $1.6 billion vs $18 million profit last year...
including a $1.5 billion loss on an equity forward derivatives contract.
The results also included $575 million in loan loss provisions, shares down 8% on the news and 71% in the last year.
Sallie Mae has said it will become more selective in the loans it makes, halting private student loans, which aren't backed by the federal government.
Sallie is eliminating 3% of its 11,000 workforce, cutting 20% of its operating expenses and completed the sale of $2.9 billion in stock, at $19.65 a share.
$2 billion of the proceeds being used to pay off its share buyback contracts. Sallie Mae had entered the contracts betting the price of its shares would increase.
Instead, the price declined. Oh and... the company said the SEC is investigating stock sales of directors and executives around Dec. 2007.
Apple bites... its iPod shipments missing Street expectations.
The company also issued Q2 guidance below the consensus estimate, stock punked 18%.
Gene Munster, an analyst at Piper Jaffray: "IPod growth rates have been declining for 10 quarters and that is alarming people.
There's just a nagging fear that a slowdown in high-end consumer spending will impact Apple."
The Nattering one muses... there are much larger issues than Ipods to be "alarmed" about...
According to Merrill Lynch data... the cost of bonds and loans used to pay for buyouts has doubled since June.
We have often Nattered about the fate of LBO leveraged buy outs and stock buy backs when the chips are down.
Jeremy Grantham concurs: Private equity "is the most underappreciated risk of all and is likely to be the center of another phase in the crisis.
Don't be a hero. Move to cash and let the other guys fish around for the bargains in the wreckage. This is the most important U.S. financial crisis since World War II.
The S&L crisis was parochial in comparison. This is the first one that is global; it has tentacles everywhere. There are plenty of bad things left in this cycle.
Private-equity deals will be in trouble. They were under-researched and over-leveraged,
and we had reached a level where the junkiest possible companies were selling at high prices."
Junk selling at high prices, sounds like the real estate market to me and looks like a reversion to the mean is already underway. Hattip to Bloomberg.
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