Executives at MBIA Inc. (NYSE: MBI), the flailing bond insurer that can't think of anything better to do than blame its struggles on short sellers, have let themselves off the hook from their agreement to invest in the company at $31 per share.On December 26, MBIA entered into an agreement with Warburg Pincus to raise capital. As part of the deal, a number of executives agreed to purchase stock at a price of $31 per share within 60 days of the close of the transaction. Then-CEO Gary Dunton agreed to purchase 40,000 shares at a total cost of $1.24 million.
In the face of the continued deterioration of the company's fundamentals, the already beaten down stock price has nearly halved since the agreement. But a deal's a deal, right? Wrong!
In an 8-K filed with the SEC, MBIA disclosed that it has amended the deal to allow the executives to acquire the stock at $12.15 per share -- more than halving the proceeds that will be raised by the deal, as well as the amount of "skin in the game" these executives will have. In addition, they now have until June 30th to hand over the dough and buy the stock. On a more positive note, the executives agreed to forfeit the options they were to receive as part of the deal. That they were willing to give up the options to reduce the purchase price speaks volumes about their confidence in the company's future.
True, this isn't exactly material and it doesn't really matter. In the grand scheme of MBIA's huge problems, a few million dollars is a drop in the bucket. But it's indicative of the arrogance of these executives. Given that the company's problems are their fault, shouldn't they be willing to stick to the deal? Shareholders who actually paid for their stock don't exactly have the option of signing a deal to halve their cost basis, and neither should executives. Shame on them.
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