Bradford and Bingley and the dead cat bounce
While it is not a term which endears the City to animal lovers there is a common phrase which can often describe the movement of the share price of troubled companies - a 'dead cat bounce'. So what is it and how does it possibly relate to Bradford and Bingley?
The term is used to describe a sustained fall in a share price to a level at which some investors will see value and believe that the fall is overdone. This can then often lead to a sharp rebound in the shares followed by further lows and in some cases a serious deterioration in the value and prospects for a company.
The share price of Bradford and Bingley has been under severe pressure for some time but last night the group announced it had renegotiated terms for the agreement to purchase a number of troubled mortgages from US group GMAC. While we await the fine detail of the deal it should help to at least stem the losses from this agreement as many of the mortgages have gone 'bad' since the agreement to acquire them came into force.
Bradford and Bingley is not out of the woods yet and there is speculation that the FSA already has a backup rescue plan in place should the company's trading situation deteriorate further. Watch this space as this story still has a long way to go.....
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