Cendant Corp.’s plan to split into four entities was the biggest news on Wall Street last month for any of the 10 publicly traded corporations that comprise the hypothetical Inman News index of real estate brokerage, mortgage and technology stocks.
The “de-merger” of Cendant into separate publicly traded companies that will offer real estate, travel reservations, hotel and vehicle rental services was intended to mollify unhappy shareholders who have watched the company’s shares languish, yet the announcement didn’t seem to make those folks any happier.
A story in the Chicago Sun Times said Wall Street “remained grumpy” about Cendant as the company’s shares lost more than 6 percent of their value after the split was announced. The per-share price of Cendant’s stock dropped $3.13, or more than 15 percent of its value in October; shares traded at $17.04, a new 52-week low, and closed at $17.31 on Nov. 1.
The upside in October’s Inman News index came in part from Freddie Mac’s and Fannie Mae’s shares, which rebounded 8.81 percent and 6.03 percent, respectively, after having lost ground in September.
Wall Street may have liked legislation passed by the U.S. House of Representatives that purportedly would toughen certain federal regulatory requirements that apply to the two mortgage companies. The White House Office of Management and Budget said that oversight still would be “considerably weaker” than that of other large complex financial institutions and that the bill didn’t include “key elements” OMB believes are necessary to protect the housing finance system, according to news reports.
Also during the month, Freddie Mac announced a plan to repurchase $2 billion of its own common stock and issue $2 billion in preferred stock. A Prudential Financial analyst maintained an “overweight” rating on the shares with a target price of $75.
Both Fannie Mae and Freddie Mac announced programs to support Hurricane Katrina relief and rebuilding efforts as well.
Other mortgage-related stocks suffered a rough month on Wall Street. Countrywide Financial Corp. and Indy Mac lost 3.41 percent and 5.61 percent of their per-share value. Both companies also traded lower on Nov. 1.
Countrywide on Oct. 27 reported net income of $634 million, or $1.03 per share, in the third quarter of 2005, a 27 percent pop compared with net income of $498 million, or 81 cents per share, reported in the comparable prior-year quarter. The lender attributed the increase to higher mortgage servicing fees that offset smaller profit margins on new mortgage loans. A charge of 19 cents per share related to Hurricane Katrina was included in the recent quarter’s financial results.
Indy Mac on Oct. 31 reported earnings of $79.3 million, or $1.18 per share, for the third quarter of 2005, including an estimated loss of five cents per share related to Hurricane Katrina. The company reported $49.7 million, or $0.78 per share, in the comparable prior-year quarter.
Shares of Washington Mutual gained 20 cents, or one-half of one percent, in October after the lender’s acquisition of credit-card issuer Providian in a stock and cash transaction valued at $6.1 billion closed October 3.
The Inman News index overall performed slightly better than breakeven in October with a gain of almost one-half of one percent. That result bested the Dow Jones Industrials, Standard and Poor’s 500 and Nasdaq Composite indices, which lost 1.23 percent, 1.79 percent and 1.53 percent of their value, respectively, during the month.
Marcie Geffner is a real estate reporter in Los Angeles.
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