Wells Fargo Offering Disappoints Street

Wells Fargo (WFC) shares dropped as much as 6% on Friday as some analysts became disappointed that the big bank did not raise more capital in its recent offering.

Late Thursday, the San Francisco-based company priced an $11 billion offering of 407.5 million shares of common stock at $27 a share to the public. The price was nearly 15% lower than its closing price on Wednesday, the day the offering was announced. The offering is expected to close next Thursday.

Wells Fargo has said that the common stock offering is to support its soon-to-be completed purchase of ailing lender Wachovia (WB). Wells agreed to purchase the Charlotte, N.C.-based company last month for $15 billion, after a bitter battle with Citigroup (C). At the time it said it planned to raise as much as $20 billion. But Wells received $25 billion from the federal government in the first round of preferred equity investments in the nation's banks through the Troubled Asset Relief Program, or TARP.

But at least one analyst says it is likely that Wells will have to come back to the markets for more capital.

"[W]e were looking for more," writes Paul Miller, an analyst at FBR Capital Markets. "Based on this low level, we expect that Wells Fargo will have to return to the market and raise additional capital at more dilutive levels."

Miller, in a note Friday, estimates that Wells Fargo's tangible common equity to assets ratio is at a "low level" of just 3.3%.