On Those JPMorgan TARP Warrants

From Bloomberg:

Dec. 11 (Bloomberg) — JPMorgan Chase & Co. warrants held by the U.S. government’s bank bailout program sold for $936.1 million, less than some traders predicted.

The Treasury Department’s second auction of warrants held by the Troubled Asset Relief Program drew $10.75 each for 88.4 million of the securities, the agency said today in a statement. Nomura Securities International Inc. trader Bernard Chriqui, who expected them to be sold for at least $12, said he may lower his forecasts for the pending sale of Bank of America Corp. warrants.

“These results could be telling for the upcoming BAC auctions, should they take place,” Chriqui, Nomura’s vice president of equity derivatives trading, wrote in an e-mail.”

There was an $8 floor, so $10.75 is still above the floor. But the sale price for these was less than the ones for Capital One (COF) and the percent premium these warrants are selling for is getting smaller as well. So there’s a risk the market may be getting saturated at this point, and premiums are getting smaller.

But on the other hand, there may be a window in which to get these warrant auctions done in and that shrinking premium could be an indicator of how fast it’s shrinking. It definitely seems like the first ones in & out of this program are getting a distinct advantage over ones who haven’t gone yet and even those who are hoping to get to this point. That doesn’t bode well for the auto companies if the Treasury Department was planning on selling those warrants in a similar way

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Filed under finance, government, Way Forward

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