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BofA: Dilution Before Dishonor (BAC)

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By Douglas A. McIntyre Updated Published
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Bank of America Corp. (NYSE:BAC) holders decided that swallowing more dilution was preferable to having Uncle Sam as a business partner.  After all, it is easier to have a little less than to have every politician from local levels to the administration calling the fiduciaries in charge of running your company by the term ‘fat cats’ every time the cameras and microphones are on.  The bank’s shareholders voted in favor of raising the number of authorized common shares to fund its TARP repayment.  This effectively came in at 10% dilution to raise the common shares by about 1.3 billion to 11.3 billion.

The special shareholder meeting vote was easily in favor with a 76% share vote from 80% of the shares casting votes.  It was required after it repaid $45 billion to get out from under the TARP after the loan was repaid with the bank’s cash on hand and more than $19 billion of new capital via ‘common equivalent securities.’

The conversion of the common equivalent securities is set to take place Wednesday morning.  Bank of America was unable to just sell common stock because of the requirements.  Brian Moynihan, its new CEO, effectively said he did not want the added dilution but it was the best way to run the company going forward.

Shares are down 1.2% at $16.01 late in the trading day and not on any unusual trading volume to note.  Dilution of 10% never felt so good.

JON C. OGG

Contact [email protected] for any questions or corrections.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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