Seems Like Irrational Exuberance

USG (USG) was a prime victim of the housing bubble's demise. Only two things saved the company from bankruptcy. First, a well-timed, somewhat coercive shareholder-rights offering in 2006 raised a lot of cash just before things got ugly. Later came a $400 million convertible bond offering at $11.40 per share, with a 10% coupon, that was purchased by 32.8% owner Berkshire Hathaway (BRK.A) simply in order for the company to preserve its previous investment. This kept USG solvent, though it added more debt at a punitive interest rate.

USG earnings per share peaked at $11.01 in 2005, dropped to $0.78 by 2007 and have been continuously negative since. The company racked up $1.868 billion in cumulative losses from 2008 to 2011, and lost another $1.08 per share through the first three quarters of 2012....288 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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