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Media Missed Details of WaMu Story

Marek Fuchs

On Tuesday, the knights of the business keyboards rang in with thoughts on Washington Mutual'sWM deal, singing its praises. But then came today, and the same outlet went all street lingo, saying the deal was a dis to shareholders

We're talking about the same multibillion dollar bailout, right?

Perhaps we should chalk up the range in coverage to business media whim, the stars and moons or a day making all the difference. But what we must take away from it is this: Always wait for the details -- those little devils -- and never, as a savvy investor, forget how quickly the mood of markets or those who buy their ink by the gallon can change. So now let's revisit the vagaries and learn what we must from the, ahem, effort.

On Tuesday, the bailout of WaMu, the troubled thrift, or bank, or thrift dressed up for Halloween as a bank was written up in good measure as stupendous news.

To The Wall Street Journal, the news of a possible cash infusion was even indicative of a move past the financial crisis. Said the Journal, in a sing-song voice:

"In another sign that some downtrodden financials are looking to move past the credit crisis, The Wall Street Journal reported that private-equity firm TPG and other investors are close to a deal to invest $5 billion in mortgage lender Washington Mutual. The capital infusion comes on the heels of last week's moves by UBS and Lehman Brothers to arrange for a combined $23 billion of new equity. Washington Mutual shares closed up $2.98, or 29%, to $13.15."

We also got from the Journal an enticing article called "Washington Mutual: Opening the Door To a Sale?" Here's the lead:

"The $7 billion investment in Washington Mutual today probably isn't the end of the line for the bank: analysts and other people familiar with the bank see a sale in the company's future. In fact, WaMu embarked on a capital infusion in part to buy time to get the bank back on its feet."

And if you think that's good and groovy, guess what? It's not all. The article all but jumps through hoops to lay down this line of positive thought, the ultimate intellectual reach:

"There is another way shareholders benefit: by raising money ahead of next week's earnings announcement -- and giving investors a peek into what those results will look like -- WaMu inoculated itself against a big hit to its stock price."

So, uh, at this point does it really make a substantial difference whether the stock price gets creamed this week or next? Meanwhile, um, the stock was up strong -- in part because of the initial coverage of the cash infusion by the eager private-equity firm, which focused on the cash and not all the details harnessed to it.

Those details came the next day, when the world seemed to change. This headline and lead from, yes, The Wall Street Journal, says it all:

Headline: "WaMu's Shareholder Dis: Capital-Raising Accord Misaligns Investor Interests; The Futility of a 'No' Vote".

Lead: "At least TPG's investors have someone looking out for their interests. The private-equity group run by David Bonderman is getting a sweetheart deal in the $7 billion capital raising it is leading for Washington Mutual. TPG's bouquet includes WaMu stock at a 33% discount, in-the-money securities that are convertible into stock and warrants to buy shares. Minority shareholders are left paying for the thrift's largesse."

And remember how this deal was initially indicative of the end of the financial troubles? Well, read this: "WaMu's Costly Rescue: Existing Holders See Stake Diluted; A New Benchmark?"

From the Journal, there isn't much about the end for everyone, only of the current cost of this individual rescue:

"Now that private-equity firm TPG and a group of investors are putting $7 billion into Washington Mutual Inc., it is clear that there are life preservers available for companies drowning in the mortgage crisis. But it also is clear that a rescue may come at a steep price."

In fact, instead of signaling the possible end as it did on Monday, Tuesday marked the good chance that it was only the beginning: "WaMu's deal may become the benchmark for other banks that are seeking capital infusions, a source of potential pain for investors."

And remember how that door was opened for a sale in Tuesday's Journal? In Wednesday's Journal, we hear about a takeover offer from JPMorgan ... only it was a takeunder. An offer apparently came for quite a few points below where WaMu was trading and the offer was described as "fuzzy" at that. Close another opened door.

Not much more to report here and only basics to conclude -- never get too taken by one day's story lines, because they can be running another way once those devils in the details are actually considered.

Know What You Own: WM operates in the banking and financial services industry, and some of the other stocks in its field include Wells FargoWFC, Bank of AmericaBAC and WachoviaWB. These stocks closed at $29.93, $38.38 and $27.52, respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.