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