Tuesday, April 8, 2008
Wa Mu Raises Money to Last Seven Quarters...
In case you haven't heard the news, Wa Mu is getting a $7 billion capital infusion from TPG, the big private equity group. WM is selling 176 million common shares for $8.75. So if you are buying the stock right now for $12.50 or so, you're a chump! Separately, yet somehow strangely related WM reported a "preliminary" first quarter loss of $1.1 billion. Initially, TPG's capital infusion was rumored to be around $3 billion. Then the number went up to $5 billion. Now it is $7 billion. I guess TPG wanted their investment to last at least seven quarters, so they could collect some management fees from their investors. Seriously, this may prove to be a very good investment for TPG, but it's difficult to know at this point. WM holds $58 billion in option arms in its $110 billion loan portfolio. Furthermore, WM has $60 billion in home equity loans as well as an addition $20 billion in subprime home loans and home equity loans. We'll see how many of those option arm borrowers pick the option of walking.
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is that the same 176 million shares that WaMu bought back in its 2007 stock buyback plan, paying $41 per share? who gets that P&L? (sorry, there's definitely no 'P' on that trade!) also, did TPG's infusion have enough in there to make sure that the CEO, when he gets the boot (sooner rather than later, we can only assume), gets a big payout? how will WaMu stay competitive if they can't offer top management attractive pay packages? as a shareholder, i'm very concerned about this.
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