B of A: When Your Stock Breaks Under Offering Price (BAC, JPM, MER)

Bank of America Corp. (NYSE: BAC) is being taken to the cleaners this morning.  Shares closed down sharply yesterday at $23.77 after closing at $32.22 just the day before.  Bank of America raised right at $10 billion via a security sale of common stock to the tune of 455 million shares at $22.00 per share.  Yet shares are trading well under the pricing level.

Bank of America itself and Merrill Lynch (soon to be B of A) underwrotethe offering.  What is interesting is that shares are down 16% at$19.71 in pre-market trading with about 30 minutes to the open.

It seems that there is pressure as JPMorgan Chase (NYSE: JPM) stillwants $5 billion in a collateral payment from Merrill Lynch (NYSE:MER).   There could be concerns that B of A will be on the hook forthose funds.  JPMorgan wants what it feels belongs to it, and MerrillLynch believes it has put up enough collateral. 

In a side note, Keefe Bruyette & Woods, or KBW, upgraded thisstock on valuations.  The new rating is still only a "Market Perform." Its research is generally given a better reception than this, butconvincing someone about "value" right now is like preaching to thedeaf.

Bank of America’s stock has had a trading range of $18.44 to $52.96 over the last 52-weeks.

Jon C. Ogg
October 8, 2008