John O

Goldman Sachs, J.P. Morgan: Who Got the Better Deal on TARP Warrants?

I think the warrants were sold in a manner which was set up to give the Treasury as little as possible and that is what happened. Who were the beneficiaries? Probably J.P.Morgan Co and others who bought the warrants, whether they hedged or not. Had the warrants been sold on a gradual basis over, time the implied vol would have approached what it was three months prior. I think the actual volatility of the stock will be reduced over the next year or so because of the sale. But after that anything goes and we may see the price at 15 or 100.

Recommendation: Buy the warrants and short the stock 300/200.

JAO