In an effort to raise additional cash and maintain its AAA credit rating, MBIA (NYSE: MBI), the largest insurer of debt, including municipal bonds, has decided to sell $1 billion of new shares. MBIA prices stock at $12.15 a share which is below Friday's closing price of $14.60. While there is concern by some that this will continue to dilute the value of these already beaten down shares, the market makers understand that maintaining the all important AAA credit rating is the foundation of the company.

Indeed, some analysts believe the stock has got twice its fair share of bad news holding it down based on book value, and have made predictions that the stock will see much better days. So much better, in fact, that analysts at Fox-Pitt Caronia are looking for a $26 to $28 price target in 12 months. I have no such crystal ball, but I do believe the stock will be higher at the end of the year. In the mean time, it is paying a 3.8% 10% yield.

The holders of the largest number of shares (and growing) Warburg Pincus, reports 16.5% MBIA stake, and is committed to $300 million of the offering. Over the weekend, the Motley Fools wrote a thin story, Why You Shouldn't Double Up, discussing large and small cap stocks and why if you hold index funds you may want to rethink your investment allocations. It included MBIA.

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. Disclosure: I am a long time shareholder of MBIA and purchased additional shares recently.