Remember a couple of months ago when I said Bank Of America needed more capital and Bank of America had a conniption fit?I do.
I was sitting quietly, eating my lunch, when suddenly the TV in front of me flashed a headline saying that Bank Of America was publicly trashing me because I had written a blog post explaining why their stock was getting crushed.
In its press release (remarkable), Bank of America dismissed my conclusion as outrageous and then denounced me as a huge scumbag, pointing at the allegations the SEC filed against me a decade ago, when I was a Wall Street analyst.
What Bank Of America didn’t mention was that those allegations were filed when I was working for… Bank of America’s subsidiary, Merrill Lynch. Bank of America didn’t mention that Merrill Lynch had categorically denied the allegations. They didn’t mention that the allegations were part of a changing of long-standing rules about how analysts and bankers were permitted to work together, rules the SEC had previously blessed. They didn’t mention that investors (Merrill clients) had voted me the No. 1 analyst in my sector in multiple polls when I worked at Merrill–a fact that Merrill celebrated and cashed in on at the time. Bank of America just strafed me and howled that I was wrong and that they didn’t need any capital.
And then, a couple of weeks later, Bank of America suddenly raised $5 billion of new capital from Warren Buffett.
Then they sold an equity stake in a Chinese bank and raised another $3 billion of cash.
And now, with their stock still trading below where it was when they trashed me, they’ve announced a new plan to raise another $3 billion of capital they say they don’t need, this time by issuing $3 billion of new stock.
That new stock, of course, will dilute the heck out of their common shareholders, who are already suffering with the stock stuck at $6-$7 a share.
So it’s certainly a relief that Bank of America doesn’t need any more capital.
(Disclosure: I’m one of those clobbered shareholders. I still own some stock I got as a Merrill employee. Out of some misguided sense of loyalty or old time’s sake or just general stupidity, I kept it.)