The announcement after Wednesday's market close of a deal for Bank of America, the largest U.S. bank holding company, to repay the Treasury $45 billion received via the Troubled Assets Relief Program, or TARP, was a slam dunk for the bank, a watershed for the industry and underlines an amazing opportunity for investors.
The discussion Wednesday about the possibility of a breakup of Bank of America already seems like ancient history.
In a late October report supporting a "Buy" rating on Bank of America, Sandler O'Neill analyst Jeff Harte said the threat of dilution to common shareholders from a capital raise tied to the repayment of TARP would be "outweighed" by the "opportunity to reduce preferred dividends." He also said "the limited available shares for issuance limit the firm's near-term capital raise ability."The company aims to get around its limit of 10 billion authorized shares (with 8.7 billion common shares already outstanding and another 1 billion reserved for convertibles, warrants, etc.) by issuing a new class of preferred shares that will be junior to other preferred shares but senior to the common, and automatically converted one-for-one to the common once current shareholders authorize a substantial increase in the allowed number of common shares. The deal requires shareholder approval to raise the authorized share limit within 105 days. If current shareholders fail to increase the authorized share limit, the company will stay within the current limit of 10 billion shares, automatically converting 200 million of the new preferred shares into common.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV