I think the round of capital raising may be complete. Bloomberg reports Bank of America Raises $13.5 Billion in Sale of Stock:
Bank of America Corp., the biggest U.S. bank by assets, said it raised about $13.5 billion in a sale of common stock as part of an effort to boost capital and weather an extended recession.
The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement today. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
This is incredibly good news for Bank of America. I’m a little surprised that it was possible. I’m going to stick with the greater fool theory on this one.
State Street also hit the markets with a secondary offering. Also from Bloomberg, State Street to Raise Capital After $3.7 Billion Loss:
State Street Corp., the world’s third-largest custody bank, sold $2 billion in stock after taking a $3.7 billion loss on fixed-income investments.
State Street sold 51.3 million shares at $39 apiece, more than the Boston-based company had planned earlier in the day. The company, which also said it will issue at least $500 million of debt, will use the money to help buy back $2.5 billion in preferred stock and warrants sold last year to the U.S. Treasury through the Troubled Asset Relief Program.
In case you haven’t been following the news on the matter, the Treasury has listed the ability to issue non-government guaranteed debt as a requirement for TARP repayment.
Also, if you are into semi-plausible conspiracy theories, Zero Hedge has had a number of pieces on the manipulation of the futures market. See here, here, here, and here for his evidence (he has more, I just got bored looking for it). The market has been bid up by huge amounts of money dumped into futures (significantly more than normal from a single source). Bank shares have been hard to borrow to short. The theory is that the markets are being manipulated to stay up until banks could raise capital. This, of course, implies that now that the banks have finished raising capital, this rather expensive manipulation technique will come to an end. If the markets continue to rise without the strange futures behavior, it looks less like manipulation and more like a good investment.
It’s not that groups don’t try to manipulate the market. That happens all the time (take the Fed’s treasury purchase announcements as an example). The hard part is showing that the manipulation actually worked. Japan tried repeatedly to weaken the Yen in the ForEx market. When the Yen actually started to fall, people cried about the manipulation. But given that their attempts failed so many times, it was far more likely that the Yen fell for reasons other than the manipulation (especially because it was also incident with a few technical indicators). I guess one of the things that makes this interesting is the (alleged / denied) secrecy. I am curious how this will play out. If nothing else, it makes for entertaining reading.
