Today’s news is positive for shareholders.
Wachovia (WB) announced today that the underwriters of its concurrent offerings of 145,833,334 shares of common stock and 3,500,000 shares of Non-Cumulative Perpetual Convertible Class A preferred stock, Series L, have exercised in full their over-allotment options to purchase an additional 21,875,000 shares of common stock and an additional 525,000 shares of convertible preferred stock. The prices for the additional shares of common stock and shares of convertible preferred stock are the same prices, respectively, at which the 145,833,334 shares of common stock and 3,500,000 shares of convertible preferred stock were sold to the underwriters.
What matters here is the the preferred have a conversion price of $31.20 a share or 25% higher than the current share price. Even the excess share of common stock that were purchased were done so at $24 a share, only a $1 discount to the current prices.
Clearly the dilution and even the need to do this are not great news but the premium paid for the preferred offering clearly illustrate the buyers anticipate price appreciation in the future.
Disclosure (“none” means no position):Long WB
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