The Five Dumbest Things on Wall Street
04/25/08 - 06:59 AM EDT
Nat Worden
3. Nat City Adds Insult to Injury
Investors who are concerned about the massive share dilution at National City (NCC Quote - Cramer on NCC - Stock Picks) should lighten up and take a stroll down penny lane. Never mind that the nation's 10th-largest bank agreed to sell an additional $1.4 billion in shares of the company at $5 a share -- a 40% discount to where the stock closed last week. Before then, the Ohio-based financial institution, which ranked among the 10 biggest originators of loans to people with poor credit histories in 2006, had just 600 million shares outstanding before the capital raising. Sure, the stock dropped 28% in response to the news, having shed 82% of its value since the beginning of last year. But in a display of those old-fashioned Midwestern values, Nat City showed shareholders how much it cares by agreeing to pay them a quarterly dividend of a penny a share. True, the production of pennies has become a waste to the U.S. taxpayer, and a penny-a-share dividend is a net loss to Nat City shareholders, given the costs of doing the paperwork. And yes, the bank previously paid a quarterly dividend of 21 cents a share and last year was paying 41 cents a share. But like credit histories, these are nitpicky details. It's the thought that counts. "We are pleased with the confidence that our investors have expressed in the value underlying National City's franchise and the fundamental strengths of our business model that will help drive a return to profitability," said Nat City CEO Peter Raskind. We'd hate to see what an expression of no confidence would be for Raskind.
Dumb-o-meter score: 85. If things get worse, Nat City might even have to scrap its dividend, but right now, that would only be insulting to the intelligence of its loyal shareholders.
RSS
