Dilutive Capital Raises are the Latest Wall Street Fad

Running a public company is no cake walk. Occasionally I have owned stocks in companies that have decided to raise capital out of the blue, merely taking advantage of a strong stock price and attendant low cost of capital a richly valued stock brings.

But while that move might set the BuySide a twitter, as they speculate as to the motives of management that is playing coy, it is infinitely more astute than going to market when Mr. Market has you over a barrel and you desperate for the money. Jack Welch might have left Jeffrey Immelt with a powder keg of businesses ready to blow, but Immelt's move to raise money on onerous terms is not likely to put him in the GE Hall of Fame.

And if you are sick of his continual PR campaign at wholly owned subsidiary CNBC, Morningstar has their own take on the deal. GE is arguably a hedge fund in drag.....what will they do with the capital? And will it spark a rally in the stock, assuming they price the secondary tomorrow morning in the hole and the El-Erian thesis works its magic? It has worked for Goldman and JP Morgan, and might just might restart the feint heartbeat at the Dow stalwart.


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GE Raises $15 Billion; Buffett Gets Preferred Stake
Bloomberg

Jamie Dimon: Better Lucky Than Good?

While it remains to be seen if Jamie Dimon pulled off a sweetheart of a deal with Bear Stearns, it appears he gets lucky from time to time:

The pressure on WaMu to shore up its balance sheet kept mounting. In March, JPMorgan Chase saw an opportunity and urged WaMu in a letter to consider a quick deal. On the same weekend that JPMorgan’s chief executive, James Dimon, negotiated his daring takeover of Bear Stearns, he secretly dispatched members of his team to Seattle to meet with WaMu executives. When JPMorgan Chase offered WaMu $8 a share, largely in stock. But Mr. Killinger balked at the price — as well as the fact that he would lose his job.

Dimon gets the parts of Washington Mutual (WM-NYSE) that he wanted, and saves roughly $12 billion. Nice. Too bad Kerry did not sign off.



But the hits just keep on coming.


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WaMu Is Seized, Sold Off to J.P. Morgan, In Largest Failure in U.S. Banking History
WSJ

Goldman’s Goldman Deal Catapaults Goldman Over Goldman’s Closest Rival

Just another reason to hate the SOB’s-now they are doing deals just to win bragging rights:

A last-minute increase in the size of Goldman Sachs’ secondary offering yesterday propelled the US bank to the top of Thomson Reuters’ equity capital market rankings for the third quarter, pushing rival JP Morgan, which had led the field until last night, into second place.

Brace yourself. Given the state of the competition, Goldman is likely to stay atop the league tables until hell freezes over..

Fundraising hike prompts last-minute change in league tables
Financial News

Foul Smells Wafting Around 85 Broad

Last week Goldman Sachs nearly got the knockout blow that many of their rivals have longed for. Were they nearly done in by the credit default swaps they so loved to trade? That is debatable, but it would seem the human piranhas who smelled blood in the water nearly finished off the mighty firm. However, it was a disaster averted, thanks in part to Hank Paulson and his merry men in Washington.

Tthe ramp in their stock in the closing minutes of trading yesterday might have told you something was up at 85 Broad, in the latest brow raiser:

An unusual surge in Goldman Sachs' share price in the last 10 minutes of trading on Tuesday raised eyebrows on Wall Street, as it came two hours before news of Warren Buffett's big investment in the bank.

Goldman Sachs shares rose more than $5 heading into the close of trading even as the rest of the market tumbled, leaving traders suspicious that inside information was used to make a profit Reuters

Goldman is moving quickly to bolser its capital adequacy, just days after denying, Erin Callan-style, that they would need to raise any capital. The regulators were no doubt pushing them to do a deal, and they were even able to get their stock up today in the wake of a dilutive transaction.

CEO Lloyd Blankfein has to be laughing, pretty much at everyone's expense, today.

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