Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (3003)	9/16/1998 4:58:00 PM
From: Rajiv	Respond to of 18998

Re: FP NEW YORK -(Dow Jones)- FirstPlus Financial Group Inc.'s stock rose Wednesday amid hopes that the company may be nearing an agreement to be acquired. But arbitragers and a fund manager said they weren't rushing to join the buyers. The Dallas-based home equity lender, whose television commercials feature Miami Dolphins' star Dan Marino, said earlier this month it was talking with potential buyers because the cost of funding its business has become too expensive. FirstPlus is rumored to be attracting interest starting at $30 a share from Providian Financial Corp. (PVN), Banc One Corp. (ONE) and General Electric Co.'s (GE) GE Capital unit, traders said. In late trading, shares of FirstPlus (FP), which hit a 52-week low of $15 Friday, traded up $1.812, or 11%, on New York Stock Exchange volume of 2.6 million shares, more than four times the daily average of 616,100. They earlier were up as much as 16.9%, at $18.625. But several arbitragers said they weren't convinced a deal would occur, and were sitting out the buying spree until they could discern a stronger signal that FirstPlus is really in play. "In the view of a lot of the short people I know, this one is a short-seller," said one arbitrageur, noting a downturn in securitization. But at the same time, the arb said, FirstPlus executives appear to be telling a very credible story about why they want to be bought. The company needs more capital to finance its lendings, and its main source - securitization deals that allow lenders to group loans together and then sell them to investors - is drying up in the current global credit crunch. FirstPlus executives recently reconfirmed analysts' earnings estimates, so it doesn't appear that the company is trying to unload a period of earnings shortfalls on a larger company, the arbitrageur said. Other market watchers said they believe there's interest in FirstPlus. Bob Chapman, an investment adviser specializing in restructuring at Chapman Capital LLC, said he's convinced FirstPlus is truly in play, but doesn't think the deal would be a good one. "The risk associated with their business trends and balance sheet makes it a tough pill to swallow," Chapman said. One fund manager who is shorting the stock noted that the rumored $30-a-share purchase price represents a hefty premium over the company's book value of $13 a share. But analyst Stephen G. Moyer of NationsBanc Montgomery Securities said FirstPlus's market share, combined with a new high loan devalue mortgage product, make it too attractive a takeover target to be dismissed. "They have the potential to earn pretty impressive returns depending on how losses work out in a down market,' Moyer said. Moyer said the company's new high loan devalue product allows FirstPlus to issue a second mortgage that also consolidates other loans, such as personal loans used to pay off credit card debt. It gives FirstPlus more protection from losses because it bundles these personal loans onto a mortgage with collateral - the house - which provides a safety net against defaults. "They have name recognition, and there's significant promise in their new high-LDV (loan devalue) mortgage," Moyer said. FirstPlus executives did not immediately return phone calls. The three rumored acquirers - Banc One, Providian, and GE Capital - declined to comment, citing policies against discussing market rumors. Earlier this week FirstPlus said it had identified "an individual connected with an investment fund" that has allegedly been manipulating the company's stock. The identity of the suspected individual wasn't disclosed and the company said it plans to pursue legal remedies and will forward any relevant information to the Securities and Exchange Commission. FirstPlus claimed the individual and his/her affiliates allegedly released false and misleading information about the company over the Internet, artificially affecting the value of FirstPlus stock. It provided no further details. - Lynn Cowan, 201-938-5293; Steve Sears, 201-938-5355 Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved.