NEW YORK (
(WAMUQ.PK) may receive an additional $2.6 billion in tax refunds, potentially doubling the amount it had expected to receive, the company disclosed in an SEC filing Thursday.
The news appeared to be the reason for a massive surge in Washington Mutual's common and preferred shares Thursday. The common stock, which trades under the ticker symbol 'WAMUQ.PK,' was up 10.48% in early afternoon trading on volumes of 17.6 million shares versus a trailing three-month average daily volume of 12.7 million shares. Preferred issues, which must be paid in full before common shareholders see any recovery, were up considerably more than that. One issue, trading under the ticker 'WAMPQ.PK,' was up 45% to $58.01, while the 'WAMKQ.PK' was up by 32.74% to $1.50.
Zachary Prensky, managing director and founder of
Little Bear Investments
, says he bought both Washington Mutual trust preferred and preferred securities as a result of the filing, adding to a small position he established earlier this week. Prensky believes the 'WAMPQ' preferred issue, which he owns, is worth from $400-to-$600 per share, or possibly more than ten times where it was trading Thursday. Even under such a scenario, however, WaMu common shares would be worthless, as the 'WAMPQ' would not be paid in full until they reached $1,000.
The Washington Mutual disclosure was made as part of a monthly operating report that its holding company must file while under bankruptcy protection. It stated that Washington Mutual had estimated it would receive $2.6 billion-$3 billion in tax refunds, but that accounting provisions under the Worker, Homeownership and Business Assistance Act of 2009, enacted by Congress on Nov. 6 "could result in additional refunds of up to approximately $2.6 billion."
, which acquired most of WaMu's assets in Sept. 2008 and has been battling in court with WaMu bond and equity holders, has also laid claim to the refunds, the filing states.
Written by Dan Freed in New York
Sophisticated investors have been buying WaMu preferred shares.