A leading bank analyst is certain that Wells Fargo (WFC) and Bank of America (BAC) are going to have to raise more money. No one seems to be listening. Both stocks are flat to up today.
Suppose that Richard Staite of Atlantic Equities is right.
According to Reuters, Analyst Staite of Atlantic Equities downgraded Bank of America to "underweight" from "neutral" and Wells Fargo to "neutral" from "overweight." He believes that each firm will have to raise $10 billion to $15 billion.
Having to come up with that kind of money could be remarkably expensive for current shareholders. Bank of America’s market cap is $77 billion with a stock price of $17. Bringing in a huge sum of capital may have to be done below market and with warrant coverage. That would drive dilution of over 20% making BAC a $12 stock.
Douglas A. McIntyre