Good News...is this the sign we needed?

I don't know about anyone else, but I am greatly comforted by yesterday's announcement about StanPac. A private equity firm has made a major investment in StanPac, which Standard & Poor's calls the worst performer of 15 homebuilders for the year through Memorial Day 2008.

MatlinPatterson effectively paid a 37% premium over the closing price before the weekend. They are placing 3 people on the board of 11 directors. The deal leaves management in place.

And, Wall Street responded with a further run-up in StanPac's share price, as much as a 60% premium on the day, before settling at ONLY a 48% premium, still more than the value used for MatlinPatterson.

So...a savvy investor pays a big premium and other, follow-on traders respond by valuing the company at a premium over the premium.

Can this indicate the bottom has been reached?

• The worst of the bigs has a HUGE vote of confidence from investors.
• The newest major stakeholder says it will not acquire more than 49% of the stock.
• The newest major stakeholder wants some say, but not controlling votes.
• It seems to like the company's leadership.
• Or, maybe it likes the position of being the worst of the bigs...maybe that's a spot that will lead to the greatest growth in its value.

I am looking for more positive news from StanPac. Their salespeople can be re-energized. Their prospects can be more confident that the builder will deliver a good home and be there during the customer care period. Their leadership can concentrate on homebuilding, and home selling, and home closing, not just crisis management and rumor-quashing.

By the way, the company made a brilliant move by including their salespeople in a conference call about this news...almost in real time. That speaks volumes about their realization that the major/sole source of revenue to a homebuilder is generated from the sales team. And, the sales team is the group that is closest to the consumer.

On a related front, new home sales were up in April, but prices were down.

DUH!

How can we be surprised that lower prices yield more absorption?

The buyers always understood. Just not many of the sellers! It took a while, but the market forces seem to be getting into balance.

I suspect we still have lots of pain to go through, but there are some early signs of progress.

Great news about StanPac.

Let's hope for more.