Wells Fargo Investors Await Details

Updated from Tuesday, April 14

The bulls and the bears have come to a crossroads after a huge rally in Wells Fargo (WFC) stock last week.

Since then, significant questions have been raised about its preliminary report of record first-quarter earnings and whether the company will raise equity . Until the company discloses more details about where, exactly, the expected $3 billion profit came from, whether it's sustainable, and whether Wells will have to dilute shareholders to shore up capital levels, the market seems to be taking a wait-and-see approach.

The San Francisco-based bank attributed the expected results to mark-ups on a heavily written-down portfolio of bad Wachovia assets, as well as new mortgage business, healthier capital markets and "strength in our traditional banking businesses."

The market was blown away by Wells' report, sending its shares up over 30% to close Thursday's session at $19.61. The fat profits -- which, at 55 cents per share, were more than double the average estimate -- left some analysts awestruck, but others smelled a rat creeping around in the wide differential.

As a result, investors have been pressing to know details of purchase-accounting adjustments performed when Wells acquired Wachovia, which would give some sense of how much pain may be left ahead, or whether gains from those sharp writedowns last quarter will hold water. The question takes on special importance, due to a foreclosure moratorium proposed by the Obama administration and agreed to by Wells, Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Morgan Stanley (MS), Fannie Mae (FNM) and Freddie Mac (FRE).