So here is some news that has me scratching my head. Last week, Armour Residential REIT (ARR) announced that they are looking to make an offer to buy out Javelin Mortgage (JMI). They're making a tender offer of 87% of the book value for the shares, which currently trade at $7.14/share, and represents a discount of around 30% of book. So you get maybe $8.50/share in this transaction. If you're an owner of JMI, that seems like a good reason to be happy at first. Here's why it's not a good deal. The current book value of JMI has almost $26 million of cash woven into it. If they buy at 87% of book, it means that Armour will pick up the current assets for about $736.5 million, and JMI is forced to pick up the slack. Since the company only has around $25 million in cash, and the carrying value of bonds now is about $846 million, they're going to take an instant loss on the sale of about $65 million. Without a doubt, Javelin is still in a cash-burning mode, but the losses are not nearly as bad as when I added them to my mREIT bankruptcy watch list. As of right now, if they tough it out another year, Javelin might actually be profitable. Armour Residential, not so much. They're still losing on the level of 4x the amount that Javelin is, and I think that they would really like it if this transaction got approved, because they aren't using the company's current assets to leverage the transaction. They want to create a separate subsidiary funded with (presumably) outside money in order to make this happen. I think Javelin will say no to the deal. I do not recommend the purchase of shares in either company. Armour Residential REIT closed down today 26 cents to 20.28, and Javelin closed up 4 cents to $7.14.