by Tanta on 7/25/2007 08:01:00 AM
Wednesday, July 25, 2007
Some of you may have noticed that LEND took quite a beating yesterday. Apparently there is some question of the viability of the Lone Star deal:
On June 29, Jean Wan filed an amended stockholder class action lawsuit against Accredited, Lone Star and several executives and directors involved in the deal.Stupid is as stupid does.
Wan claimed Accredited would be better off remaining independent because many of the company's subprime mortgage rivals had already gone bankrupt. Once the market recovers, Accredited could thrive as one of the few remaining subprime specialists and shareholders shouldn't miss out on this opportunity, the suit argued.
The complaint is being called the "Forrest Gump" suit because it compares Accredited's situation with that of the two main characters in the 1994 film.
Forrest and Lieutenant Dan buy a shrimp boat and start the Bubba Gump shrimp company. But they struggle early on because there are so many other boats catching all the shrimp. Then a hurricane hits, destroying many boats and leaving Bubba Gump owning the last shrimp boat in the area. From then on, Forrest and Dan become rich, the suit explained.
Accredited, like Forrest and Dan, was able to weather the subprime mortgage storm that destroyed rivals like New Century Financial.
"Effectively, Accredited is now the 'Bubba Gump' of the subprime lending market," the suit said. "Currently, Accredited stands in the enviable position of being able to grab up the market share left by New Century and the other subprime lenders that have declared bankruptcy or left the market."
"This position will allow the holders of Accredited's equity to reap the lion's share of profits available in the subprime lending market," the complaint added. "The Individual Defendants, however, wish to keep these profits for themselves and freeze out Accredited's current shareholders."
Posted by Tanta on 7/25/2007 08:01:00 AM