Now that 10 firms have the green light to pay back the TARP, the question is what is going to happen with the stock warrants the Treasury owns. Publicly traded TARP firms have the option of either negotiating the repurchase of the warrants at "fair market value" or allowing the Treasury to sell the warrants to third party investors. Based on the Treasury's complete inability to determine fair market value so far, Jamie Dimon is probably throwing his initial offer on the table right now. According to Linus Wilson, an assistant finance professor at the University of Louisiana-Layfayette, the shrewd negotiators at Treasury are taking a 40% haircut on average on the warrants.
Old National paid $1.2 million for warrants Wilson valued at $6.1 million, and Sun paid $2.1 million to repurchase warrants Wilson tabbed at $5.3 million. Altogether, the government has received $12 million from five banks for warrants that, using Wilson's model, were worth $20 million -- an underpayment of 40%.
And you thought Congress was really pissed when the TARP money went out the door....
Posted by guest , Jun 09, 2009 1:27PM
It is a frog, definitely a frog.
Posted by guest , Jun 09, 2009 1:30PM
12 USCS 5223(a)&(d). Read before rant.
Posted by guest , Jun 09, 2009 1:32PM
assistant finance prof at U-La La?? That's like analyst at Piper Jaffray
Posted by guest , Jun 09, 2009 1:32PM
Wow! A free Sony Ericsson W350.
Posted by guest , Jun 09, 2009 1:39PM
err, why can't a third party outbid the bank??
Posted by guest , Jun 09, 2009 1:50PM
ANUS!
Posted by guest , Jun 09, 2009 1:55PM
Are Piper Jaffray analysts worse than
BAC REIT folks?
Posted by guest , Jun 09, 2009 1:56PM
@5
Slow down buddy. That comment made WAYYYYY too much sense for the Federal Government to do it. What do you think they are? A for profit business? Psssh. Where have you been for the last 80 years?
Posted by guest , Jun 09, 2009 1:57PM
So it's taken two or three weeks for Greg to catch wind of this story. In the next month, I suspect the government will sell the warrants back to the issuing banks at a "fair and reasonable" 40% of market value. Two or three more months will pass and someone in Congress will finally get wind of it, but by then it will be too late.
Business as usual.
Posted by guest , Jun 09, 2009 2:00PM
My is TG, what is vol?
How do I value an option?
Posted by guest , Jun 09, 2009 2:02PM
Why can't this prof get his haircuts right? he's the same guy that's saying this to the "nytimes"
http://www.nytimes.com/2009/06/10/business/economy/10tarp.html?hp
"All told, buying back the warrants could cost the banks as much as $4.6 billion, according to an estimate by Linus Wilson, a finance professor at the University of Louisiana at Lafayette. Taxpayer warrants in JPMorgan Chase could be worth $1.7 billion, according to Professor Wilson’s estimates. Warrants in Goldman Sachs and Morgan Stanley could be worth well over $600 million each. "
Posted by guest , Jun 09, 2009 2:09PM
Payback Time Not Looking So Good For Greg Michaels.
Posted by guest , Jun 09, 2009 2:15PM
gerg michaels gonna move to clusterstock in 2 weeks
Posted by guest , Jun 09, 2009 3:20PM
After getting shit from commenters, the next phase of Greg's hazing is going to be an elephant walk with EP and Bess, although I'm not sure how the mechanics of that will work.
Posted by guest , Jun 09, 2009 4:35PM
Linus Wilson doesn't know how to price long-dated warrants (with no merger protection).
Posted by InfiniteGuest , Jun 09, 2009 5:10PM
@1 I'm going with, it's a banana frog.
BTW nice old (relatively short, SFW) article about Lisa "Dime Piece" Falcone for those (stalkers) who may be interested:
http://nymag.com/nymetro/shopping/fashion/columns/look/15109/
Posted by guest , Jun 09, 2009 8:53PM
If a bank pays back all TARP money in full, the warrants are just cream. Why should Treasury push hard on their value? Having said that I think ebay would be the best place to sell them.