Once the pricing is announced we will see $10 by the end of this week
Only thing holding this back from going parabolic is the uncertainty of the secondary pricing. Capital infusion will remove all doubts as to the financial health of the number #1 mortgage insurer. Housing starts at 6 years high. Economy improving. House values are appreciating rapidly, reducing the default risk exponentially.
We were at $60 a few years ago. That is where we are heading, now that the trend has turned in our favor. Shorts -not so much.
LOL please tell me why anyone would pay $10 for an offering when they could buy 21mil. shares at $8.50 on open market?? And you think the demand will increase more than the number of newly created shares to push the stock to $10?
When this stock was $60 the book value of the company was $55. We are definitely not heading there with the remaining $5 book value. House price have started turn around since 2011. They have tons of MI on their books prior to the bottom of housing market. They'll be in distress until house prices start going above at least 2009 levels. With this economy, the future seems bleak for RDN.
RDN does indeed need a capital infusion to strengthen its balance sheet. The housing recovery, while real, is mitigated by materially tougher lending standards. The growth in housing sales is disproportionately driven by all cash, high equity, or investment buyers, not the market for RDN. Buyers with compromised credit history, or low downpayments are finding it burdensome, time consuming, and in many cases impossible to obtain mortgages. This is the target market for RDN. Sustained price appreciation and declining unemployment will ultimately but slowly expand the customer base for RDN. Please witness the rollercoaster ride homebulider stocks have experienced since February 19.
Everything was fine in 2007 until interest rates moved up, and people with adjustable rates couldn't pay their mortgages. Interest rates are at their lowest, bound to move higher. When they do, home price will start falling again.
Also higher interest rates will cause, fixed income assets (like treasuries and corporate bonds) to lose value. Insurance companies are heavily invested in fixed income assets. Mainly because of government rules and regulations.
New rules make it very hard for people to get a mortgage now. Although that'll result in good quality MI, it'll also result in less business to offset the money losing MI written prior to 2009.
Their business is depended on a reasonably good domestic economy, low interest rates and constantly rising home prices. fudge any of those variables and you have a bad economic environment for MI business.