Vox Rationalis

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

J. S. Kim wrote:

> Yes I admit I was a little careless in my explanation above but...
>I purposely selected companies
> in which the difference between the float and outstanding shares
> was either negligible or just slightly higher.

Purposely selecting companies with a high float percentage does not show carelessness. It shows that you intended to use float. Since you're railing against deception, I'll chalk this up to you not knowing how to properly calculate dilution.

> (1) the dilution of the secondary offering;

If the stock is trading at a premium to book value, and if the capital raised can be put to work at the same return as current capital, is the secondary really dilutive? We've all heard a lot of talk about "banks not lending." Shouldn't you be figuring out the impacts of the capital raise on future profitability results before declaring them to be bad?

> (2) the discounted prices of the secondary offering;

Again, you should do a little research into HOW offerings are priced, since it appears you think the offering companies make this decision unilaterally.

> and (3) the deceitful earnings announcements
> of many banks in the banking sector that was able to raise the sector
> as a whole recently.

Two things. One, that's not what you said. You painted with a broad brush, saying that executives of banks issuing new shares are guilty of lying about their earnings. So just to be clear, you think that the executives of Wells Fargo and U.S. Bancorp have been cooking their books and lying about it, right?

> Deceit often wins short term. Fundamentals win long-term. We'll check
> back in several months and see how things turned out.

I find it amusing that you think several months is "long term."

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

J. S. Kim wrote:

> 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.

In using float rather than shares outstanding, are you just ignorant of the which is appropriate, or are you intentionally trying to overstate your case by choosing the wrong one?

> 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.

You might want to learn the mechanics of secondary offerings, especially how they are priced, before you make such assumptions (and potentially libelous statements).

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

"significant secondary offerings that will inevitably massively dilute shareholder value"

If the stock's price is higher than tangible book value, and if there are opportunities in the lending market to put funds to work, how exactly is raising equity dilutive?

The 20 Highest of the High-Yield Dividend Aristocrats

Don't forget to consider Countrywide as an entry for BAC. It's running about 90% of the deal's value, which I don't think is enough of a spread to cover the risk involved, though there has been no indication of BAC backing away. If you're interested in BAC and want to play arbitrageur, consider CFC if the spread widens.

The 20 Highest of the High-Yield Dividend Aristocrats

Be very, very careful with this list. Here be some monsters.