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alstry (< 20)

IVY ZELMAN Drinking MORE Kool-Aid?



March 22, 2008 – Comments (3)

Zelman's take on the SPF announcement from Bigbuilderonline. 

Ivy Zelman, of Zelman and Associates, was not buying the talk among investors about a sale or bankruptcy filing. In a research note, she said, "Given Peterson's investment banking experience, as well as his candid responses on the conference call about the need for 'urgency' and 'decisive' actions, several investors speculated that this move was made by SPF to facilitate a sale of the company, or some other corporate restructuring. While we cannot rule out an eventual sale of the company, after talking to management following the conference call, as well as our industry contacts, we believe that this move was made to re-invigorate the company's employees in this challenging market environment and to build long-term shareholder value."

Zelman continued, "Reading between the lines, we have heard in recent months that SPF has focused on selling many of its top land parcels in markets such as California in order to generate cash and pay down debt. While we believe this was the prudent course of action given the company's leverage situation, our industry contacts reported that some of SPF's local operational managers had become frustrated with corporate's mandate to unload these strong projects."

Re-invigorate teh company's employees?  Long-Term shareholder value?

Sale of the company?  What is Ivy drinking to think that would even be possible?  She knows SPF's liabilities are hundreds of millions more than its assets and its losing MORE millions every week it keeps the doors open.  If you paid somebody $100 million dollars they wouldn't likely take SPF for a penny a share.  Just look at Bear Stearns, the Fed had to give JP Morgan $30 BILLION simply so they would pay $250 million BSC?  And the Bear shareholders are upset?

If SPF sold ALL its parcels of land, it probably wouldn't come close to paying off liabilities. 

Right now the board is likely scared to death.....that sat on their fat back sides as the company wasted away the corporate assets.  Officers and Directors have a fiduciary duty to shareholders and creditors not to commit waste.  You think selling land for pennies on the dollar and building specs in this environment is not wasting assets?.......especially when you are stuffing huge amounts of shareholder and creditor dollars in your pocket.

My guess is that SPF board and executives right now are calling their insurance company and checking on guess is that damage could reach the hundreds of millions of dollars.  Right now, can anyone say DAMAGE CONTROL?  No wonder Peterson says he is acting with a "sense of urgency"...everyday the board waits, damages could be increasing by the millions.

For an excellent overview of the current market conditions, I stongly suggest reading FloridaBuilder's most recent blog.

By the way, who pays for Ivy Zelman's work?  Do the builders pay her to review them like S&P?  Does she really charge anyone other than the builders to read what she writes?  If so, I can't wait to hear how much.

3 Comments – Post Your Own

#1) On March 22, 2008 at 6:36 PM, alstry (< 20) wrote:

"Given Peterson's investment banking experience, as well as his candid responses on the conference call about the need for 'urgency' and 'decisive' actions,..."

On the conference call Peterson refused to answer whether SPF was contemplating bankruptcy or the status of loan violation negotiations with its lenders.

NOW IS THAT CANDID RESPONSES ON THE CONFERENCE CALL?  What CEO refuses to answer whether his company is contemplating going bankrupt?

Really, which flavor kool-aid is IVY drinking?  Who is paying Ivy for writing of this nature?

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#2) On March 23, 2008 at 7:01 AM, klemenv (96.95) wrote:

Great post.

What strikes me, is the particular laguage used. For example: "Re-invigorate teh company's employees?  Long-Term shareholder value?"

Sky-flying language that doesn't contain any information. Like the new VP of Marketing on steroids talk.

To me it looks like that Ivy has been talking to lawyers too. 

By using statements that are always valid. Because they don't contain any information.

So if everything goes well, she was right, otherwise she was mislead as she beleived that management will act in prudent course ... 


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#3) On March 23, 2008 at 6:23 PM, cabuilderboy (81.52) wrote:


First, Ivy was one of the first analysts to call the homebuilder skid. I was fortunate enough to meet her and listen to her speak about builders from in 2004-2006.  Most notably, Forbes ranked her as the best analyst in the country two years ago, when she was credit suisse. But, that doesn't mean she cant be wrong.

I would not count on any large homebuilder being sold. After all, vultures wait for the animal to die, before they start picking at the carcass. Meaning, those of us in the business know we can just wait and get the assets at a better price, if we just wait for the bank to take over! I would be surprised to see any builder sold at this time.

SPF's problems are well documented, yet their stock price continues to rise as govt. stimulus is injected. I do see them starting spec inventory out here without the sales to support, so that also concerns me about their future. I think the next 90 days will be crucial for them.



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