MBIA Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of bond insurer MBIA (NYSE: MBI  ) jumped as much as 15% today on heavy volume after multiple banks pulled out of a lawsuit against the company.

So what: In early 2009, MBIA split its insurance operations, creating a new subsidiary -- National Public Finance Guarantee Corporation -- that would handle all of the company's public finance business. The banks on the other end of MBIA-insured structured products weren't thrilled with this because they thought that if MBIA was able to make National Public Finance a separate entity, then the financial strength and claims-paying ability of the battered structured-product business would be hurt. The lawsuit has thus far tangled up National Public Finance, affecting its ability to write new business. Yesterday, though, MBIA announced that both JPMorgan Chase (NYSE: JPM  ) and Barclays (NYSE: BCS  ) had pulled out of the lawsuit.

Now what: The retreat of JPMorgan and Barclays is a start for MBIA in getting the litigation resolved, but there are still quite a number of banks -- including Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) -- continuing to pursuing the case. Investors may see some light at the end of the tunnel thanks to the move by JPMorgan and Barclays, because there could be hopes that they will create a domino effect, leading other banks to drop the suit and letting National Public Finance get its business going.

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