Mr Cooper Group Inc (COOP)

[jackfburns]

Bopfan started an interesting discussion over at Y...

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_W/threadview?m=te&bn=86316&tid=896496&mid=896496&tof=14&frt=2#896496

Much faster just posted about the bizarre disparities among WMI equity issues. For his example, he uses the widely different amounts of newco stock that can be obtained by a $1,000 investment today in Ps, Ks, or Qs. Much has no explanation for this anomaly.

It appears to me that the market is shrugging off the plan for some reason, because despite the long awaited consensual agreement -- the true global settlement -- the market continues to do business as usual, disregarding the forecasts predicted in the plan.

My explanation is the market doesn't believe things will be ultimately resolved as described in the plan. The only thing that's changed between Monday and Tuesday is that it is now official that (1) equity will own the newco and its attendant tax benefits, and (2) the newco unquestionably owns $17.7B in NOLs.

I said yesterday that I think the market believes that players will want a piece of the WMI action and will make offers to MW and the EC that will result in a radically different plan than POR7.

It would be very easy for a deep pocket player (e.g., a bank) to re-age WMI's debt AND the $7.5B in preferreds. With the FJR in place the debt service can't be more than $200MM per year. Reinstating dividends on the preferreds would be about $500MM per year (I don't know if the Ks and TPS are owed past dividends; if they are they could be on the table, too, and if Ks and TPS get past dividends Ps would, too). That's $700MM to obtain $7B in cash and $17.7B in NOLs.

That leaves the commons as owners of the newco. Assuming arguendo that the merger partner/acquirer's tax mavens find a way around 382, then the commons would be drastically revalued as either shares in the acquiring/merging entity or joint venture.

We do know one thing about financial players, and that is that they are always looking for new profit opportunities. An entity with $7B cash and $17.7B in tax benefits doesn't become available every day. To believe that Wall Street would not take notice of such an entity is not credible. Players are trying to figure out how they can make WMI work for them, and I think the market thinks so, too.

There could be other explanations for the current prices, but this one seems the most plausible.