Paragon’s dramatic share price fall could spark a swoop from a rival company, with mortgage experts saying that it could be picked up at a bargain price.
The buy-to-let mortgage specialist’s share price fell by 38 per cent on Tuesday this week after the company revealed it might have to carry out an emergency rights issue because of funding problems in the current market.
This comes as speculation mounts that Merrill Lynch has indicated that it would listen to offers for niche lender Wave, the specialist lender that it bought for a price reckoned to be around £25m just 17 months ago.
Paragon has seen its share price drop by over 80 per cent from the year high of 672p to 125p and market experts say this price level for the stock undervalues the quality of the assets held by the company.
John Charcol senior technical manager Ray Boulger says: “Paragon is very good at what it does and has a very good book of business. The fall in share price presents an opportunity for someone to buy them up very cheap.”
A source adds: “Now that its shares have plunged, Paragon would be an absolute bargain. I would be surprised if they were not sold.”
Paragon says the terms set by its bank to extend an existing £2.2bn facility, of which over £1bn has already been drawn, were too expensive and of a short-term nature.
It says that it is not for sale but, as it is a listed company, it would have to consider any offer.
Wave chief executive Colin Snowdon declined to comment on market speculation.