Filed under: Deals, Bad news, Short stories, Bank of America (BAC), Countrywide Financial (CFC), Stocks to Sell

Short interest in Countrywide Financial (NYSE:CFC) moved up by a big 26 million shares as of May 15 to 102.4 million compared to the number on April 30. Someone thinks the deal for Bank of America (NYSE:BAC) to take the company over might be in trouble. Shares of a number of other financial companies were also hit hard during the period.

With everyone, including the FBI and US Congress, looking into Countrywide’s lending practices and stock sales by management, the short gamble may be a smart one. The troubles at the lender might become so numerous that BAC can’t stand the smell.

There might be another, less obvious, reason the the shorts think the CFC/BAC deal is in trouble. That would be Bank of America’s share price. Wall Street has lost a lot of confidence in the management of the bank. Over the last three months, BAC shares have done even worse than those of Citigroup (NYSE:C) and much worse than JP Morgan’s (NYSE:JPM) shares. The BAC stock is off almost 20% during that period.

It is not clear whether the near-collapse of Bank of America’s stock value is due to concerns about the businesses it is in now, or the business it will be in with the buyout of CFC. Either way, Wall Street would be very happy to see a risky deal go away.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

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Filed under: Deals, Private equity, Market matters

Calpine (NYSE: CPN), which is a major power company, has experienced lots of drama over the years. However, the company has been able to stabilize things - and has recently come out of bankruptcy.

But suddenly the drama has returned: NRG Energy (NYSE: NRG), a rival, has made a $11 billion hostile bid for Calpine (it’s a stock-for-stock transaction).

And there’s lots of momentum for the deal. Keep in mind that Harbinger Capital Partners, which is a major hedge fund, owns 24% of Calpine’s shares and is pushing for a combination.

No doubt, NRG-Calpine would be a powerhouse, amounting to roughly 45,000 megawatts. It will also expand NRG’s presence in the valuable California market.

True, the valuation for the transactions looks meager. But, I suspect we’ll ultimately see a higher bid. According to Harbinger’s letter to Calpine:

“We believe this offer represents a good starting point and that the Board should immediately engage with NRG concerning the terms.”

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Before the bell, Earnings reports, Analyst reports, Deals, Apple Inc (AAPL), Pfizer (PFE), Gap Inc (GPS), Merck and Co (MRK), Analyst initiations, salesforce.com inc (CRM), Suntech Power Hldgs ADS (STP)

Before the bell: Futures higher as oil bursts through $135

It seems that the BCE (NYSE: BCE) buyout plan, has hit yet another bump on the road, only this one couldn’t be as simple to overcome. A Quebec appeals court reversed a lower court and rejected the $33 billion buyout plan accepting the claim of a group of bondholders that the deal is unfair to them. BCE shares are plunging nearly 15% in premarket trading.

Earnings today are due from Barnes & Noble (NYSE: BKS) — just after the company stated it was interested in buying Borders (NYSE: BGP) — and Gap (NYSE: GPS) — a day after the clothing retailer announced an expansion in Russia.

Suntech Power Holdings Co. (NYSE: STP) shares are jumping over 7.5% in premarket trading after the solar energy company reported that first-quarter earnings more than doubled on 76% higher revenue. Earnings reached $55.8 million, or 33 cents an American depositary share and revenue reached $434.5. Analysts estimated 28 cents for the quarter.

Salesforce.com (NYSE: CRM) late Wednesday reported first-quarter net income of $9.6 million, or 8 cents a share, 13 times higher than the comparable period last year. Sales grew 53% to $247.6 million. Analysts had expected earnings of 7 cents a share on revenue of $235.8 million. CRM was upgraded by a few analysts.

Apple Inc. (NASDAQ: AAPL) was initiated with Outperform and a $235 target at Oppenheimer.
Pfizer Inc. (NYSE: PFE) anti-smoking drug Chantix received another blow Wednesday after a nonprofit group’s report about serious physical side effects prompted the Federal Aviation Administration to ban the drug’s use by pilots and air traffic controllers.

Staying in pharma, Merck & Co. (NYSE: MRK) has halted a study of an experimental drug, MK-0524A, which was supposed to bring new life into sagging cholesterol franchise The FDA has already refused to grant sales of the drug.

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Filed under: Deals, Options

BCE Inc (NYSE: BCE) a Quebec Canadian appeals court rejected the buyout of Canadian telecommunication company BCE.

BCE bondholders claimed the deal is unfair to them. BCE, Canada’s largest telecommunications company, announced on June 30, 2007, it concurred to be acquired by an investment arm of Ontario Teachers Pension, Providence Partners and Madison Dearborn Partners for an announced deal price of $42.75 per share. The transaction is scheduled to close by June 30.

BCE July option implied volatility of 28 is below its 26-week average of 33 according to Track Data.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Deals, Options

NRG Energy (NYSE: NRG) confirmed an all-stock transaction with an exchange ratio of 0.534 for CPN shares, valuing the potential transaction at $22.70.

Calpine (NYSE: CPN) closed at $21.28 Wednesday.

CPN overall option implied volatility of 41 is near its 16-week average of 43 according to Track Data, suggesting non-directional risk.

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