Building Materials Holding Corporation
(NYSE:BLG) shares dropped $1.09, or 8.52%, to $11.70 today after
Moody's cut the company's ratings amid continued troubles in the
residential housing market. Meanwhile, the company is expected to
report earnings tomorrow, which has many investors guessing. There is
light at the end of the tunnel, however, as famed activist hedge fund
Chap-Cap is involved with the company and pushing for change!
Chapman's
hedge fund is primarily seeking to make changes to the company's
executive compensation structure. While nobody should punish management
for the steep correction in the housing market, the board's granting of
generous financial rewards during its 2002-2006 boom years should not
be ignored. Through stipulating the the homebuilding cycles are beyond
BMH control, corporate and divisional overhead can be restricted by a
realistic, practical management team.
Chapman also suggested
that the company hire an investment banker to explore the complete or
divisional sale of the company. The hedge fund insists that there would
be high private equity and public interest in the company through
conversations with the company's peers and leveraged consolidators of
the home building industry. In the end, BLG is definitely a stock to
keep an eye on as this situation unfolds!
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