According to CNBC's Kate Kelly, Paulson has given up on his $30 price target on Bank of America by the end of 2011, and instead has dumped a "substantial stake" in its holdings of the bank's stock. And so, the claims that the hedge fund which has now become the butt of all due diligence jokes, is about to eat more crow, especially as other objective skeptics have long been warning that the bank is massively underreserved for what is about to become a legal fee freeforall following the just announced non-settlement with the BlackRock, Pimco, New York Fed group, and thus a ticking timebomb. But no, Paulson is in it, so it must be a Buy, Buy, Buy. Idiots. Incidentally the market is only slowly getting to realize that the "settlement" announced a few days ago is actually horrendous news for the bank (but confirms that monkey throwing feces move the marginal money) as we said first upon hearing the news.
For much more on what we warned about last year, read Jody Shenn's latest piece: "Moynihan’s 2-Cents-on-Dollar Mortgage Offer Faces Court Hurdle"
And here is Kate Kelly's report:
Investors on Wednesday welcomed Bank of America’s $8.5 billion settlement with disgruntled mortgage-securities holders, sending its shares up 3 percent.
But at least one major shareholder had already taken some of its chips off the table, according to people familiar with its position: Paulson & Co., the $38 billion hedge-fund behemoth.
During the course of the past two months, Paulson sold a substantial portion of its 124 million-share stake in BofA, according to these people. In light of yesterday’s news, firm founder John Paulson may now, in fact, be regretting his decision, these people say, and looking to upsize his holdings in the bank yet again.
The apparent selldown is significant because of Paulson’s outsized influence both in the hedge-fund world and at BofA, where he is the eighth-largest shareholder of record, according to first-quarter securities filings
And as a reminder here is what could go next if redemption notices accelerate as the realization of the obvious dawns on the firm's LPs: