Novastar suspends dividend; no longer a REIT

Posted Sep 17th 2007 7:15PM by Zac Bissonnette
Filed under: Bad News, NovaStar Financial (NFI)

It's amazing that it took Novastar Financial (NYSE: NFI) this long to announce it, but now it's official: The company scrapped its plans to pay a dividend on its 2006 "profits", and will therefore have to forfeit its status as a real estate investment trust.

The company expects the new tax status to have a "significant adverse effect" on its third quarter results.

This is a great time to give a shout out to BloggingStocks' own Peter Cohan, who had one of the best short calls I've seen in a long time. In a brilliant post on December 18th of 2006, he wrote that "Potential loss of short-term liquidity could make it tough for NovaStar to repay these debts." He suggested that investors short the stock, and the stock is down more than 92% year to date. Great call Peter!

At the time, many were complaining that the company was a "victim" of naked short selling. Obviously, short sellers were the least of Novastar's concerns, as the company is currently fighting for its life.

Tags: NFI, Novastar, Subprime