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Banking, finance, and taxes

Citigroup (C) And Bank Of America (BAC) Capital Needs Could Damage Stock Prices

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By Douglas A. McIntyre Updated Published
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bank1The Financial Times is reporting that Citigroup (C) and Bank of America (BAC) may each need to raise over $10 billion. If that is true, to get money in the capital markets and not from the government, they are going to have to offer shares at well below market.

Citigroup’s share price could be cut in half under those circumstances.

Citi’s current market capitalization is only $17 billion. Its share price is $3, so it it has to offer stock at $2.50 to bring in the capital and avoid having the government own the majority of the bank, existing shareholders could see the value of their holdings cut in half.

At Bank of America which has a market cap over over $50 billion, the situation would not be so bad, but stockholders could certainly face a 20% dilution of the bank raises money from private equity interests.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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