Triad Guaranty, Inc. (OTCMKTS:TGIC): A Wildcard Trade

Triad Guaranty, Inc. (OTCMKTS:TGIC) is one of the most exotic stocks you could find among alternative- reporting pink sheets, the rock bottom of stock quality. TGIC took a long time to get there, and it’s mostly the cause of the real estate and mortgage market bust. The company receded from regular OTC filer to alternative sporadic trading with estimated 300 shareholders, after regulators took over the mortgage insurance branch, Triad Guaranty Insurance Corp. TGIC0528.png

It is puzzling then what made investors mop up 4.8 million shares, lifting TGIC 355% to 76 cents. The company has not seen a promotion, and the reasons behind the rise are generally obscure. Still, the pink sheet markets seem to be the scene where investors try to gain even from the crash of the mortgage insurance behemoth.

Currently, TGIC has little to offer in terms of real business, and all news concern a scraping by to survive in some form after the fallout of toxic mortgage papers. With no further information, TGIC is a big unknown, probably developing on its own on speculative bets that could fuel a trend. In a rare and risky move, pumpers may take up the newly active ticker, but they will have a lot of explaining to do about the red flags surrounding this company.

Mortgage insurers had to absorb the shock when homeowners defaulted on their loans. TGIC was among the most heavily hit. But the recent spike follows a dalliance of hedge funds with the tickers of stricken mortgage lenders. Maverick Capital and Paulson& Co are stocking up on shares of two other insurers, and since the news appeared on the TGIC updates front page, this may have ignited hope that the pink sheet would still draw interest and be saved. Still, the buyout interest is only a speculation on the side of other deals.

Historically, TGIC shows the following achievements in the latest financial report:

  • $820 million total assets
  • $1.6 billion total liabilities
  • $32 million total revenues
  • $31 million net loss

Of course, it is hard to make heads or tails of these numbers in the conditions of a meltdown of securities valuations. But still, it is easy to see an immensely active, immensely leveraged operation that proved unstable.

In any case, we will track TGIC to see how the drama develops, but until then it is best to avoid investments of unknown risk unless you can afford the losses.

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