This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/may/16/john-paulson-william-lyon-construction

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
John Paulson bets on William Lyon to claw back construction millions John Paulson bets on William Lyon to claw back construction millions
(4 months later)
John Paulson, the investor who made billions of dollars on the housing market as it was crashing in 2008, is hoping to make some more as the construction industry claws its way back.John Paulson, the investor who made billions of dollars on the housing market as it was crashing in 2008, is hoping to make some more as the construction industry claws its way back.
Paulson's firm, which has made some unfortunate investments of late, is backing William Lyon Homes, the homebuilding company from Newport Beach, California that raised $217.5m on Thursday through an initial public offering that listed the company's shares on the New York Stock Exchange for the first time.Paulson's firm, which has made some unfortunate investments of late, is backing William Lyon Homes, the homebuilding company from Newport Beach, California that raised $217.5m on Thursday through an initial public offering that listed the company's shares on the New York Stock Exchange for the first time.
William Lyon builds homes in western states, including California and Nevada, where the housing crash wiped out home values for years.William Lyon builds homes in western states, including California and Nevada, where the housing crash wiped out home values for years.
On Wall Street, William Lyon's shares met with lackluster demand. They closed at $25.50, only a few cents above their offering price of $25 a share. The underwriters of the deal, Credit Suisse and Citigroup, boosted the cost of the shares on Wednesday night, as they judged that investors would pay well for William Lyon stock.On Wall Street, William Lyon's shares met with lackluster demand. They closed at $25.50, only a few cents above their offering price of $25 a share. The underwriters of the deal, Credit Suisse and Citigroup, boosted the cost of the shares on Wednesday night, as they judged that investors would pay well for William Lyon stock.
That was more than initially expected. The shares rose to $28 when they opened, but spent most of the day in a steady drop from there; in midday trading they were only a few cents above the $25 offer price.That was more than initially expected. The shares rose to $28 when they opened, but spent most of the day in a steady drop from there; in midday trading they were only a few cents above the $25 offer price.
William Lyon Homes, like Paulson, has been struggling to engineer a comeback. The company is remaking itself after it emerged from bankruptcy last year with the help of private investment firms like Luxor Capital and Colony Capital. Its sales jumped by a third last year to $76.4m, but so far this year is recording a loss of $3.5m.William Lyon Homes, like Paulson, has been struggling to engineer a comeback. The company is remaking itself after it emerged from bankruptcy last year with the help of private investment firms like Luxor Capital and Colony Capital. Its sales jumped by a third last year to $76.4m, but so far this year is recording a loss of $3.5m.
Paulson & Co poured $30m into the company in November. The firm currently owns 21% of the stock and 10% of the voting power, putting it third in the hierarchy of its most powerful stockholders. The executives and officers of the company hold 39% of the voting power – presenting a powerful insider bloc – and Luxor Capital, which holds 30% of the common stock, controls 37% of the votes.Paulson & Co poured $30m into the company in November. The firm currently owns 21% of the stock and 10% of the voting power, putting it third in the hierarchy of its most powerful stockholders. The executives and officers of the company hold 39% of the voting power – presenting a powerful insider bloc – and Luxor Capital, which holds 30% of the common stock, controls 37% of the votes.
Paulson, who made his fortune betting on subprime, has a former Lehman Brothers investor, Michael Barr, leading the William Lyon investment. Barr sits on the company's board but took no payment for his services in 2012.Paulson, who made his fortune betting on subprime, has a former Lehman Brothers investor, Michael Barr, leading the William Lyon investment. Barr sits on the company's board but took no payment for his services in 2012.
Paulson's fund has been looking for good investments after lackluster performance on assets such as gold. In an interview with Bloomberg BusinessWeek, he attributed his returns to "overconfidence."Paulson's fund has been looking for good investments after lackluster performance on assets such as gold. In an interview with Bloomberg BusinessWeek, he attributed his returns to "overconfidence."
 Despite the small size of Paulson's investment in William Lyon – $30m is a rounding error to his fund, which is over $30bn in size – it's an indication that Paulson's firm may be looking to go back to the housing well to find some of its lost mojo. Despite the small size of Paulson's investment in William Lyon – $30m is a rounding error to his fund, which is over $30bn in size – it's an indication that Paulson's firm may be looking to go back to the housing well to find some of its lost mojo.
Homebuilding companies suffered a lack of interest during the housing crash and for years after, but the tide has turned for them on Wall Street. William Lyon is the third homebuilding company to go public this year; the first, TRI Pointe Homes, was the first homebuilder to list its shares on an exchange in eight years.Homebuilding companies suffered a lack of interest during the housing crash and for years after, but the tide has turned for them on Wall Street. William Lyon is the third homebuilding company to go public this year; the first, TRI Pointe Homes, was the first homebuilder to list its shares on an exchange in eight years.
The reason for the change of fortune: the housing market has improved. The indications of a strong recovery in the housing market have been a surprise since February 2012, when new-home prices started steadily rising; they're now about 11% higher than they were at this time last year.The reason for the change of fortune: the housing market has improved. The indications of a strong recovery in the housing market have been a surprise since February 2012, when new-home prices started steadily rising; they're now about 11% higher than they were at this time last year.
While some parts of the country are struggling to recover, select markets are booming. According to the Financial Post, a $950,000 Brooklyn townhouse for sale drew 300 visitors. Stories abound of buyers walking into sales with ready cash. Some economists, like Dean Baker, co-director of the Center for Economic and Policy Research in Washington, warn that the stage is being set for a new housing bubble.While some parts of the country are struggling to recover, select markets are booming. According to the Financial Post, a $950,000 Brooklyn townhouse for sale drew 300 visitors. Stories abound of buyers walking into sales with ready cash. Some economists, like Dean Baker, co-director of the Center for Economic and Policy Research in Washington, warn that the stage is being set for a new housing bubble.
Other economists reason that a housing bubble is nowhere near. Jim O'Sullivan, chief US economist with High Frequency Economics, said the housing recovery is still in its beginning stages and has a long way to go to make up the ground it lost during the crash.Other economists reason that a housing bubble is nowhere near. Jim O'Sullivan, chief US economist with High Frequency Economics, said the housing recovery is still in its beginning stages and has a long way to go to make up the ground it lost during the crash.
"I think what we've seen is rational and not exactly exuberant," he said, putting a twist on the old Alan Greenspan warnings of "irrational exuberance" as housing and stocks were rising in the late 1990s."I think what we've seen is rational and not exactly exuberant," he said, putting a twist on the old Alan Greenspan warnings of "irrational exuberance" as housing and stocks were rising in the late 1990s.
With the housing market back, investors have been wondering how to make money on it. Many have piled into homebuilders like Toll Brothers and Lennar, but others have taken more creative investing paths.With the housing market back, investors have been wondering how to make money on it. Many have piled into homebuilders like Toll Brothers and Lennar, but others have taken more creative investing paths.
Bill Smead of Smead Capital Management said he approached the housing boom from other investments, like buying shares of Home Depot because it sells home construction equipment, or buying shares of banks including Bank of America, Wells Fargo and JP Morgan because they hold an inventory of foreclosed homes. He also bought shares of Comcast on the reasoning that new homeowners will need cable.Bill Smead of Smead Capital Management said he approached the housing boom from other investments, like buying shares of Home Depot because it sells home construction equipment, or buying shares of banks including Bank of America, Wells Fargo and JP Morgan because they hold an inventory of foreclosed homes. He also bought shares of Comcast on the reasoning that new homeowners will need cable.
Our editors' picks for the day's top news and commentary delivered to your inbox each morning.