Last week bond-insurer Ambac Financial Group, Inc (NYSE: ABK) saw a significant bounce in its share price, jumping from $0.64 on April 8th to $3.23 on April 13th after the company posted surprise earnings fueled from a major tax refund and as Mad Money Host Jim Cramer told investors to “hold their nose” and purchase the stock.
Specifically, Cramer wrote, “MGIC (NYSE: MTG) has rallied 400% during its extended period of “worthlessness.” I want some of that worthlessness. Radian’s (NYSE: RDN) up 600% during its “worthless” period. I would have liked a piece of that worthlessness”
Much of the momentum behind Ambac’s surprise gain was tempered when JPMorgan Chase analysts said that the situation for Ambac was still as dire for the company was it was before the surprise bounce in its share price, stating “ABK is battling to avoid an event of default, which would cause all of its insured contracts in CDS form to call for accelerated payment. This would lead to the equivalent of a bank run on the remaining capital in the Ambac Assurance OpCo, and would create a disorganized situation for all policyholders”
After the note from JPMorgan, the stock’s share price tumbled down from its $3.23 high to $1.62 on April 13th. However, on Monday (April 19th), the stock’s share price jumped by eighteen cents or about 10% for the day to close at $1.94. In after hours trading, the stock continued to move upwards another 1.55% to $1.97.
There was no apparent move for the 12% bump in the bond-insurers price, but for now, the bounce that Ambac received is continuing.
