We were not at all keen about the TPG-led $7 billion investment in Wamu, and we appear to have company. Note that it’s one thing for an analyst to downgrade a stock, quite another to recommend selling it short. From Bloomberg:
Washington Mutual Inc.’s full-year loss will be wider than first estimated, according to Goldman Sachs Group Inc. analysts, who recommended selling the shares short. The lender declined as much as 6 percent.
Washington Mutual, the biggest U.S. savings and loan, may lose $3.30 a share this year, said Goldman Sachs analysts including New York-based James Fotheringham in a note to investors today. Goldman previously forecast a 2008 loss of $1 a share for the Seattle-based company….Washington Mutual may have $23 billion in mortgage-related losses, Goldman said today. The firm cut its 12-month price target on shares of Washington Mutual, also known as WaMu, by 17 percent to $10.
“Given WaMu’s disproportionate exposure to states” where home prices are forecast to decline, Goldman expects losses between $17 billion and $23 billion, the analysts wrote. Washington Mutual may have a $14 billion provision charge in 2008, the analysts said…..
Washington Mutual is at risk of further losses on credit- card lending, the Goldman analysts said. “WaMu leads its peers with respect to recent growth in credit-card delinquencies,” they said.
Fotheringham advised Goldman’s clients to sell short, which is the sale of stock borrowed from shareholders. People who sell short hope to profit by repurchasing the securities later at a lower price and returning them to the holder.
Goldman reiterated its “outperform” rating on Washington Mutual bonds and credit-default swaps….
The lender on April 8 reported a $1.1 billion first-quarter loss and said it will stop making loans through mortgage brokers and close 186 home-lending offices.