Pretty good case for a comeback at Barratt

Imagine being able to buy a house plot for under £25,000. Well if you bought Barratt Developments, you could own 89,400 plots for just £2.2 billion. That is the sum total of this week's £500 million stock-market value of the business, plus the cost of taking over the housebuilder's £1.7 billion of net debt.

Well over £500 million has been wiped from the value of Barratt in a month, as the shares more than halved from £3 to 1493/4p at last night's stock-market close, having recouped 6p.

The City fears that the company will be forced to write off as much as £1 billion from £4 billion of group assets - and as a result be forced into a rights issue to prevent breaching loan-to-value ratios imposed by lenders.

This crash in confidence partly reflects rising City concerns over housebuilders in general. But there is also extra concern over the management of the business, which was founded by Sir Lawrie Barratt in 1958.

Last week Barratt appointed the former head of Electrocomponents Bob Lawson as chairman.

It's a routine appointment to replace Charles Toner, who is retiring. Nevertheless, quite why this beleaguered board thinks that a man who spent 26 years running a successful electronics business can re-energise a housebuilder is a mystery, the answer to which is known only to headhunters.

Barratt was worth £3.2 billion in early February 2007, when the shares were trading as high as £13.10. That same month the company forked out £2 billion for the Leicester-based housebuilder Wilson Bowden and the 33,000 plots of land it owned.

This purchase was masterminded by chief executive Mark Clare, a 50-year-old accountant who joined Barratt in the summer of 2006 after spending 12 years with British Gas, and Mark Pain, the finance director, who joined in 2006 after a gap year from Abbey.

The pair are referred to by disillusioned-staff at Barratt as the Marx Brothers.

David Wilson and his family were fortunate enough to take £199 million in cash as part of the Wilson Bowden deal. But they were unfortunate enough to take £243 million in Barratt shares; worth about £34 million today - which amounts to a paper loss of more than £200 million.

The share-price crash has followed the general plummet in sales of new homes.

In the six months to December, Barratt sold 9000 homes. As late at 27 February, Clare was still forecasting a "strong forward order book". However, on 14 May he admitted that reservations had fallen to 200 a week - about 10,000 a year - if Barratt is very lucky.

Sir Lawrie, now 80, and still life president, is unlikely to helicopter in to rescue the company, as he did in 1991. Then a similar collapse in the housing market almost brought the collapse of the House of Barratt.