MBIA Inc (MBI)

[Enterprising Investor]

MBIA stock soars after extraordinary dividend announced; Roth cuts to Neutral (12/08/23)

MBIA (NYSE:MBI) stock skyrocketed 65% in Friday morning trading after the municipal debt insurer declared an $8-per-share extraordinary dividend after Thursday's close.

In essence, the company is distributing to its shareholders the bulk of a dividend that it will get from its National Public Finance Guarantee Corp. unit.

Roth analyst Harry Fong downgraded the stock to Neutral from Buy after MBIA (MBI) stock rose to his previous price target of $12. With the rating change, he increased the price target to $15, or $7 after the extraordinary dividend is paid.

"We have long believed that MBIA had significant excess capital, but we erred in how fast it could deliver that capital to shareholders," he wrote in a note to clients. "The company still has excess capital, but timing the next extraordinary dividend is anyone’s guess."

He eventually expects the company to be sold but said, "The timing of a sale is nearly impossible to forecast as is its eventual sale price." MBI's potential realizable value is about $1.5B, Fong calculated. With 51.1M shares outstanding as of Sept. 30, 2023, the per-share potential value comes to ~$29 per share before the extraordinary dividend or discounting for the timing of a sale.

In contrast to Fong's Neutral rating, the SA Quant system has a Sell rating on the stock, while the average Wall Street rating stands at Buy.

Source: Seeking Alpha