Tuesday, September 04, 2007

A Naked Shorting Poster Child Sucks Wind

More bad news today -- and I mean really bad news -- from the naked shorting poster child Novastar Financial. Seems that it may not be long for this world.

This subprime mortgage lender is a favorite of the anti-naked-shorting loons, and was hyped up the wazoo by Phil Saunders, who runs a now-moribund stock conspiracy website called "thesanitycheck.com" under the alias "Bob O'Brien."

Unfortunately, a lot of brainless people listened to this former used medical equipment peddler-- who started a website called "nfi-info.net" to push the company -- and bought shares of this dreadful company.

It's down 17% this afternoon, on a whole passel of bad news. Stock is now trading at a bit over 7, so it is a good thing it initiated a reverse stock split! Otherwise the company would be under three bucks. The stock was trading at a split-adjusted $30 before the reverse split.

$30 and change to $7 and change. Nice stock pick, Saunders!

Seems the company has canceled a rights offering, is cutting back on its business, and--oh my, look at this:

The company said its independent auditor, Deloitte & Touche LLP, wouldn't consent to the rights offering unless NovaStar reissued its 2006 financial statements. The auditor wanted to add footnotes disclosing how problems in the subprime market adversely affected NovaStar's operations, liquidity and financial condition.

Further, NovaStar said that its auditor wanted reissued financial statements to include language related to "the uncertainty of NovaStar's ability to continue as a 'going concern.'" (emphasis added)

That "going concern" stuff means that Novastar may be about to kick the bucket. Aw shucks.

Say, I wonder if Phil Saunders has any more hot stock picks? I hear they'd be great shorts.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

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