Macro Tsimmis

intelligently hedged investment

Wachovia Corporation (WB) update #2

Posted by intelledgement on Mon, 14 Apr 08

Wachovia (WB), our finance sector short play, announced their 1Q08 results today and—surprize!—they lost money. $393 million worth of red ink, or 20 cents a share—and that doesn’t count the additional “market disruption-related valuation losses of $2.0 billion”—marks the first reported quarterly loss for WB since…well, actually, we can’t seem to confirm that they have ever reported an operating loss before…if so, it must have been before we relocated from New York to North Carolina in the early 90s as they have been invariably profitable since then.

But wait, there’s more. The company also announced another round of preferred stock offerings, this time aimed at raising $7B in new capital. LOL this is just two months after they raised $3.5B (and assured shareholders that they were then well-capitalized for 2008 and that the dividend was safe). Oh…right…speaking of the dividend—it has been sliced 50% to 37.5 cents/share.

We are sorry to see it, but these guys were dumb enough to pay $25B to buy Golden West in 2006 at the peak of the housing bubble—and between the bad mortgages they got in that deal and their own only a Bear Stearns style bailout will avert insolvancy here. BSC stock declined 95% from January to March…we may not get that much here, but we sure expect to see prices far lower than $30 per share.


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