ACA Capital, A Disastrous Post-IPO Year (ACA)

Is it normal for a company to respond to a "negative credit watch" call from a ratings agency, only to see its stock fall another 31%?  Enter ACA Capital Holdings, Inc. (NYSE:ACA)….

Last Friday after the market close, ACA responded to a ratings action by Standard & Poor’s after it placed the ‘A’ financial strength rating of ACA Financial Guaranty Corp. on CreditWatch with negative implications, based on a variety of factors.  The Company also reported strong Public Finance and Structured Credit production in the third quarter of 2007 and results for the nine months of 2007 were in excess of the posted full year results for 2006.  ACA said it intends to have further discussions with S&P to better understand its actions and the remedies that may be available to respond to the negative credit watch position.

24/7 Wall St. has warned investors of the potential impending exposure to severe problems inside ACA.   ACA Capital is a holding company that provides asset management services and credit protection products to participants in the global credit derivatives markets, structured finance capital markets and municipal finance capital markets.  That sounds a hell of a business to be in right now, the hell where the fire and torture is taking place anyway.

ACA came public in late 2006, but as soon as the credit crunch came in summer of 2007 its shares went from good, to flat, to down, to way down, to somewhat stable, and now down even far worse.  Another few days like this and the stock will get to go trade on the beloved pink sheets.  At $2.06, shares are at a new low.  The last year’s trading range is $2.48 to $16.55. 

Jon C. Ogg
November 12, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.