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H&R Block (NYSE:HRB) lost a lot of shareholder money. Losses of approximately $85.5 million have been reported as a result of losses in the sub-prime mortgage market. The company is attempting to spin the results focusing only on continuing operations. they need you to forget about mortgage problems.

A large sale of Option One is pending to Cerberus. So the problem will be amputated away. The cost will be determined in the last moment. Therefore we may expect more bad news when the deal is to close. Cerberus does not have a mandate to overpay and by now everyone knows the sub-prime market is damaged goods.

H&R is having reasonably good news in its area's of core expertise. Preparing taxes.

The problem with sub-prime is that as the market continues to fall apart the purchase price will worsen. There will probably be post closing conditions. Remember what happened to General Motors. GM was stung with approximately one billion dollars of post closing charges because of its involvement in sub-prime. Hey was Cerberus the purchaser of GM's finance unit.

As I mentioned in my post of June 7, 2007 management knows that bad news is coming and they have set up the dividend to pay Oct 1 to record holders of Sep 10. This is approximately the same time frame as the anticipated Cerberus closing.

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