Subprime wholesaler NovaStar Financial, Kansas City, saw its share price fall by as much as 44% on Wednesday after a controversy over its profit outlook for the next several years.At one point, its shares traded down to $9.80 before recovering slightly after the REIT issued a statement clarifying its outlook on "taxable" income vs. GAAP profits. The company said its stock fell dramatically after certain news stories "mistakenly" reported that the subprime lender does not expect to generate profits the next several years. NovaStar -- whose 52-week high is $38.49 -- said it "generally" will be profitable on a GAAP basis over the next several years but will show little, "if any," taxable income from 2007 to 2011. The company said accounting rules allow it to accelerate income recognition during the "early life" of its portfolio. As a REIT it must pay out 90% of its earnings in the form of dividends to shareholders. When it released fourth-quarter earnings on Tuesday -- it lost $14.4 million -- it also said it may give up its REIT status. Besides being a subprime funder it manages a $16.3 billion portfolio.

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