Evaluating Ambac: Intrinsic Value Withstanding Market Volatility

Ambac (ABK), the beleaguered financial guarantor, looks to be close to liquidation on the surface. Its share price has fallen a stupdendous amount, from around ninety dollars before the subprime implosion, to two and change today.

This drastic decrease in market capitalization appears warranted on the surface -- Ambac, along with many of its peers, strayed from the lucrative business of plain-vanilla municipal bond credit enhancement. The company's foray into exotic and ill-conceived structured finance deals has placed unprecedented levels of stress on Ambac's financial position, leading to exaggerated pronouncements of doom from the media and various investment professionals. The company itself, perhaps understandably, has continually claimed it has ample resources to fulfill all contractual obligations.