Ambac is cheap compared to settlement from BAC or JPM
The company could trade north of 50 if one settles and north of 70 if both settle. Both banks want to resolve their RMBS exposure and know the deck is stacked against them based on relevant testimony in prior cases. The tax loss carryforwards are worth even more and I can see a scenario where the stock trades above $100 and the company goes back to underwriting conservative business while experiencing a very profitable runoff from their existing premiums. Little downside and great upside make this one a must own stock here in the low 30s.
Wouldn't look for any settlements before May or June. Based on discussions on Ambac board during BK process, there was an indication that the estate would have a right to the bank settlements within a year of the new corporations creation. It was indicated as a legal consequence of the litigation being open at the time of bankruptcty declaration. Don't think they want to go back and disperse funds to the old stockholders, although I would enjoy that since I hedged my bets between debt and common when tney filed. I'm just making a little profit on the new common versus a lot of profit for anything I could get out of the common on the early resolution scenario. 50 a share is a good deal in a few months since I've been waiting a couple of years for the investment thesis to come to fruition.