J. S. Kim

U.S. Bank Shares: Pump Almost Over, Get Ready for the Dump

To address some of the criticism of my article. I wrote this article after the market close on May 11th and referenced a report on May 8th that actually did provide compelling evidence that shareholder value would be "massively diluted" as I stated.

i.e. COF's public secondary offering was for 56 million shares on a current float of 380.34 million shares. Keycorp offered up another approximate 115 million shares (if we assume the secondary offering was priced anywhere near their current market price) on a float of 429.80 million shares. You can figure out how many shares the other banks offered up as well by the total amount they have targeted to raise and then comparing it to the current float. So a 14.7% and 26.8% dilution in the float is significant, if not already massive.

But I figured that these secondary offerings would "inevitably massively dilute shareholder value" because in addition to the secondary offerings, many banks were offering them at significant discounts to the present market price, which again, I believe is a sure sign that the executives understand their share values are grossly distorted and have been inflated on the back of deceit and creative accounting techniques.

Since the Bloomberg article I referenced was dated May 11th, here's the proof of whether my prediction of massive devaluation of shares will come true. I've listed below the share prices of many of the banks discussed above below as of market close on May 8th:

COF $31.34
USB $20.54
WFC $28.18
MS $28.18
KEY $6.97

All we need to do is to revisit these prices several months down the road and see where they stand to see if I was right or wrong. I'll come back and post the shareprices several months from now right here even if I was wrong, for there is no one in the world that will be right 100% of the time. And if it turns out I was wrong, I'll be the first to admit it.

However, in the end, I never believe that attempting to expose shenanigans and deceit that will help investors prevent losses is "borderline reckless"; rather misleading investors, ignoring clear warning signals, and advising clients to buy into the US financial sector at this point is what I would consider to be very unwise.

On May 12 07:04 AM Joshua Morgan Brown wrote:

> this is borderline reckless
>
> "Since when is slashing dividends and diluting shareholder stock
> in the best interests of shareholders"
>
> The smartest thing the banks can do right now TO BENEFIT SHAREHOLDERS
> is to raise capital. the preferred coupon to the TARP is in the
> way of ever being able to increase buybacks or dividends as things
> improve. They need to clean that up and pay back the gov so they
> can get back to business. Smart managers sell stock when they can,
> and right now, these banks are able to sell stock easily. The secondaries
> are being placed so quickly that the roadshows to promote the offerings
> are being cancelled. It would be scary if the banks didnt use this
> window that they didn't have just 7 weeks ago.
>