Joining the chorus of financial institutions desperate to beef up capital in today's uncertain markets is CIT, who announced concurrent offerings of common stock and convertible preferred today after the close of trading. The funniest thing about this offering (I'm sure you never believed there could be humor in a stock offering) is that CIT is using some of the net proceeds from the sale of the common to pay dividends to the outstanding preferred stock holders as well as interest to the outstanding junior subordinated notes. So, if you're actually buying into this stock offering, the company is taking your money and handing it out to other investors before it begins to deal with its major liquidity issues.
Nevertheless, issuing gobs of common, convertible, or preferred stock is the current thing to do as evidenced by:
1.) Citigroup, who plans to sell $6 billion of hybrid bonds.
2.) NCC, who is raising $7 billion, as noted below this morning.
3.) JPMorgan, who issued $6 billion of hybrid bonds.
4.) Wachovia, who raised $8 billion in common and preferred stock.
5.) Washington Mutual, who raised $7 billion.
6.) Lehman who issued $4 billion in convertible preferred stock, and UBS who is planning a major rights issue.
7.) Did I forget someone? I'm sure I did. Oh, that's right. My mother. I called my mother and told her that investors were dying to throw billions of dollars at any financial institution, even if it was carrying tons of assets it doesn't know how to value. So she's opening a bank, collateralized by some old shoes and is issuing a $2 billion convertible preferred. Give her a call if you're interested.
Monday, April 21, 2008
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4 comments:
In a stunning turn of events for the US macro-economic picture, Hollywood stars are emerging as bastions of financial stability potential providers of liquidity for a cash-poor banking system. In the latest example, Britney Spears has been approached by Citi and Merrill to help shore up their moth-eaten (balance) sheets. According to most sources, her interests are very diversified (she'll sleep with pretty much anyone, right?), she managed to avoid the entire baby seat bubble, and she has the ear (and lips and tongue) of the playas within the Fed (assuming, of course, that K-Fed is the Fed's stopper out of the bullpen. Gotta be, right?).
In other celebrity news, Calista Flockhart has signed a huge endorsement deal with Lehman to pose as the personification of their anorexic capital position. :-)
so when people talk about "all that cash on the sidelines", how much are they really talking about? the six deals enumerated in your post total $38 billion right there. i'm not trying to imply that capital is finite (leave 'finite supply' to the oil arguers) or even that $38 billion is a significant percentage of idle cash, but i would like to know if you think these sponges are soaking up liquidity, and is there a point that the market says "no mas".
My money is on the sidelines - but I'm waiting for Bistro Burger to go public....Then I pile in. A man's gotta eat!
Everyone points to the $3.4 trillion currently sitting in money market funds as a sign that investors have cash sitting on the sidelines. Perhaps that is a bullish sign that investors are really just waiting for the right opportunity to step in. But look at all the money that sat in Japanese postal funds for years earnings 0% interest because Japanese investors did not want to touch equities. Maybe all of the private equity and distressed investors who just bought into this round of capital raising by the banks really are picking the bottom. However, if they are wrong, it'll be tough to stomach investing again when the third round of capital calls begin somewhere down the road.
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