http://www.fwallstreet.com/article/175-wells-fargo-and-wachovia-together/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 http://www.fwallstreet.com/article/175-wells-fargo-and-wachovia-together/#comment-2775 Bankinvestor Mon, 30 Mar 2009 12:43:43 +0000 http://www.fwallstreet.com/article/175-wells-fargo-and-wachovia-together#comment-2775 Nice discussion. Some thoughts: Wells will likely come out fine in the end. The shareholders might come out fine too, but Wells made some serious blunders. First, they mistakenly felt that the Gov'ts 25B would count as capital. The stress tests will discount it, putting huge pressure on Wells to raise something north of 15B soon. They have a few ways to accomplish this, but need the Gov't to be patient. That seems to be wearing thin. The current risk is that the TARP will have to be converted to common shares @ $19.06. That is dillution that wasn't counted on in Stumpf's analysis of what a great deal Wachovia was. It appears that there is no way that the dividend will be reinstated until the Tier 1 capital ratios get in line. So, the current questions are, will Wells make any money, and will they have to covert preferred to common. We will probably know the answers to these questions soon. Nice discussion. Some thoughts: Wells will likely come out fine in the end. The shareholders might come out fine too, but Wells made some serious blunders. First, they mistakenly felt that the Gov’ts 25B would count as capital. The stress tests will discount it, putting huge pressure on Wells to raise something north of 15B soon. They have a few ways to accomplish this, but need the Gov’t to be patient. That seems to be wearing thin. The current risk is that the TARP will have to be converted to common shares @ $19.06. That is dillution that wasn’t counted on in Stumpf’s analysis of what a great deal Wachovia was. It appears that there is no way that the dividend will be reinstated until the Tier 1 capital ratios get in line. So, the current questions are, will Wells make any money, and will they have to covert preferred to common. We will probably know the answers to these questions soon.

]]> http://www.fwallstreet.com/article/175-wells-fargo-and-wachovia-together/#comment-2762 Randomfundamentalist Tue, 17 Mar 2009 06:28:14 +0000 http://www.fwallstreet.com/article/175-wells-fargo-and-wachovia-together#comment-2762 I just wonder how anyone can invest in a company that still has 20:1 leverage on non-preferred equity. Or am I looking at the investment too simply? If so, how do you justify leverage that could wipe out equity given a 5%drop in the value of their investments? I just wonder how anyone can invest in a company that still has 20:1 leverage on non-preferred equity. Or am I looking at the investment too simply? If so, how do you justify leverage that could wipe out equity given a 5%drop in the value of their investments?

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