Ambac Financial Group (AMBC) has seen a surge in its share price, rising almost 10% over the past five trading sessions. This positive momentum follows a period of decline since the beginning of 2024. The driving force behind this recent surge is the anticipated closing of the sale of Ambac’s legacy financial guarantee business by year-end. This sale is poised to generate significant cash for the holding company, potentially leading to substantial earnings within the next couple of years, according to Roth Capital Partners.
Analyst Harry Fong, from Roth Capital Partners, has upgraded Ambac Financial Group from a Neutral rating to a Buy rating, while simultaneously increasing the price target from $13 to $15. The analyst’s optimistic outlook is based on the company’s planned share repurchase program. Following the completion of the financial guarantee business sale, Ambac will initiate a share repurchase program of up to $50 million, which is expected to provide a significant boost to the stock price.
Ambac is projected to have approximately $180 million in deployable cash after the sale of its financial guarantee business, Ambac Acceptance Corp (AAC), to Oaktree Capital Management, following the repayment of a bridge loan. Of this amount, the company intends to use up to $50 million for share repurchases. However, Fong predicts that the company will only repurchase shares at current levels up to about $15 per share, as it requires capital for acquisitions, primarily in the distribution business.
While the full rollout of Ambac’s new specialty insurance distribution business may take some time, there are potential strategic changes that could generate investor enthusiasm sooner. These include the possibility of selling its underwriting operation, which Fong believes is not central to the company’s overall strategy.
At the time of publication on Wednesday, shares of Ambac Financial Group had climbed by 6.18% to $11.86.
