Ambac Financial: The Squeeze is On

As previously noted, the bond insurer got the attention of traders last Thursday when it surprisingly announced that its Board of Directors authorized up to $50 million for share repurchases of its common stock. The news was also oddly timed – it came an hour and a half before the closing bell on a pre-holiday shortened trading session. The liquid small cap trade is now abuzz again today. In response to persistent speculation of insolvency, Ambac Financial Group (ABK) released information about collateral requirements and terminations of its investment agreement business related to recent actions by the rating agencies. CEO Callen added the company has “ample liquidity to manage our commitments going forward.” The stock is up $.31, or 22.8%, to $1.71 on volume of 9.1 million shares. Shorts are getting a run for their money as covering is most likely fueling the bounce, particularly those who went short more recently sub $3 and $4 a share. A total of 74.4 million shares, or 26% of the 268.4 million share float is short. That number is double the 31.3 million shares short in mid-May, and up astronomically from 7.1 million shares this time last year, for obvious reasons.