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EPDs Affect NovaStar Financial Earnings.
Kansas City, MO -- Subprime wholesaler NovaStar Financial Inc. here saw its share price plunge 50% last week after reporting a fourth-quarter loss and raising the possibility that it would "de-REIT."
The company - whose 52-week high is $38 compared to last Thursday's low of $9 - has been a target of short sellers who believe its current $5.80 dividend is now doomed.
In the fourth quarter, the top 20 ranked subprime funder lost $14.4 million, compared to a profit of $26.4 million in the same period a year earlier. Its annual profit fell 50% to $66 million.
The company admitted it is suffering from the same malaise as many other subprime wholesalers: early payment defaults, poor whole loan prices and impairment charges.
In its earnings statement, the nonprime lender signaled that it might move to end its status as a real estate investment trust. REITs must pay out 90% of their earnings in the form of dividends to shareholders. (Hurt by EPDs and razor-thin profit margins, several publicly traded nonprime REITs are currently in financial trouble.)
Last Wednesday, when the company's share price went into a freefall, it blamed the plunge on what it called mistaken media reports about its profit outlook through 2011. The non-depository did not cite any specific news organization and would not respond to a telephone call placed to it by National Mortgage News.
Also last Wednesday, with its share price spiraling down more than 42%, it issued a statement saying ...
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Source: HighBeam Research, EPDs Affect NovaStar Financial Earnings.