Monday, May 5, 2008

Bank of America: Break the Silence

This morning, Friedman, Billings, Ramsey analyst Paul Million said that he believes that Bank of America should walk away from its Countrywide purchase because of deteriorating assets. At the very least, he suggested that BAC should/will renegotiate to a price between "0 and $2" per share (compared to an approximate deal price of $7 based on BAC's closing price on Friday).

Bank of America needs to comment on this suggestion immediately. Countrywide is down over 10% in the pre-market because of this news. In a post-Bear Stearns era, the power of rumors and speculation has been demonstrated. If BAC intends on following through with the deal, they should make it known. If they are indeed thinking about renegotiating or withdrawing, CFC shareholders will take the hit eventually anyway - better now than later.

Rumors such as these can become self-fulfilling prophecies. BAC needs to clarify this issue before more damage is done.

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