Monday, June 02, 2008
Stop me, oh oh oh stop me
Stop me if you think you've heard this one before
- The Smiths
It's like deja vu all over again
- Yogi Berra
It's said that history doesn't repeat, but it rhymes. In that case, break out your Norton Anthology of Poetry, because there's a story brewing in the UK that will remind you of the heady days of last September.
UK mortgage lender Bradford and Bingley has come under the cosh this morning after announcing a profit warning and issuing stock at 55p a share to Texas Pacific. While that is not necessarily a bad thing, it doesn't look good when your stock closed at 88.25 on Friday and you have an existing share offering which has been priced at 82p. Doh! Someone, namely the underwriters, has been left holding a very smelly bag. The chief executive has resigned, and the share price has dumped, and has now closed most of the discount to the offering level in the Texas Pacific deal.
B&B has been well known as a weak hand in the current environment, as they have a large market share in the formerly lucrative but now toxic "buy to let" mortgage segment. April mortgage approvals registering the lowest print in history will not have improved sentiment, either. Already, there are unconfirmed reports of queues outside of B&B branches.
If all of this sounds familiar, it should. The backdrop is eerily similar to the Northern Rock fiasco of last September; all we need now is Swervin' Mervyn to tell us that there will be no bailouts, and we'll know that the end is nigh for B&B. In any case, when NRK's share price started to gap lower like B&B's has done today, the situation swiftly became terminal.
Such a scenario would clearly not sit well with the equities generally and the FTSE (where Macro Man retains a short exposure) in particular, where the share price of bigger fish (RBS) is also rapidly approaching its capital-raising tender level. As Macro Man types, the FTSE is sitting bang on support at 5985; a break would target another 2% lower before you can say "nationalization."
Stocks elsewhere have also rolled over, and Macro Man is very keen indeed to see if that weakness persists now that the month-end window dressing is over. If so, it could herald the start of another rather interesting summer....