MBIA Soars Following BTIG Initiation With $22.50 Target

Tyler Durden's picture

It is no secret that MBIA has long been one of our favorite longs (and by longs it is really a contrarian bet on various bad things happening - our latest piece can be found here). Today, we are happy to see that BTIG has come out with an initiating coverage report on the name following virtually all the same logic we presented two months ago, only with a price target that makes even us blush: $22.50. To wit: "We are initiating coverage of MBIA with a BUY rating and a $22.50 price target which equates to a 1.0x multiple of 2012E year-end stand-alone adjusted per share book value of National ($26.26) less the holding company net debt per share ($3.73). Our valuation is based on our view that if MBIA is able to resolve the fraudulent conveyance and Article 78 cases challenging its transformation either through a settlement or a court judgment, the value of National will flow up to the holding company and to shareholders.... Given our view that the challenges to MBIA?s transformation will be resolved through a settlement and that its shares could nearly triple in a post-announcement short squeeze, we believe MBIA offers one of the market's most compelling risk-reward propositions. Following almost four years of uncertainty during which its status as a viable entity has been in question, MBIA appears closer to resolving the various challenges it faces, unlocking the value of National Public Finance Guaranty Corporation – the company?s public finance unit – to the benefit of shareholders, and resuming its role as one of the last remaining players within that industry." and the kicker: "We would note that the large short interest in the stock relative to its float - 28.5 mm shares short versus a float of 140.4mm shares – combined with highly concentrated institutional ownership could set the stage for a dramatic short squeeze as short sellers might have to scramble to find shares to cover." Remember: "Is MBIA A Volkswagen-Like Short Squeeze Candidate?"  Mmhmm.