US Earns Net $840.37M Via Wells Fargo Warrants
May 21, 2010 11:00:31 (ET)
(Adds detail on Wells Fargo purchases, comment from Wells Fargo CFO; updates share price, in the second, third and fifth paragraphs.)
By Meena Thiruvengadam
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The U.S. is set to earn a net of $840.37 million from its sale of 110 million warrants to purchase shares of Wells Fargo & Co. (WFC) stock, the Treasury Department said Friday.
However, more than half of the Treasury's earnings from this auction are from Wells Fargo itself.
Wells Fargo on Friday said it purchased 70.2 million of the Treasury warrants--nearly 64% of those outstanding. "We believe avoiding future shareholder dilution by acquiring these warrants at this price is a compelling investment for our shareholders," Wells Fargo Chief Financial Officer Howard Atkins said.
The warrants have a strike price of $34.01 and expire in October 2018. The minimum bid price for the warrants was set at $6.50 each.
The deal is scheduled to close Wednesday.
Wells Fargo shares were trading at about $29.19 recently.
The auction results bring the Treasury's earnings so far from warrant sales to more than $7 billion.
The Treasury obtained warrants in several banks as part of its $700 billion financial-sector bailout, otherwise known as the Troubled Asset Relief Program, or TARP.
Banks accepting cash through the program were required to provide the Treasury with warrants to maximize returns on the taxpayer funds. The Treasury has been auctioning its warrants over the past several months as banks have repaid their government loans.
The Wells Fargo warrant auction, which occurred Thursday when the Dow Jones Industrial Average slid 3.6%, earned the Treasury less than sales of warrants to buy shares of Bank of America Corp. (BAC) and J.P. Morgan Chase & Co. (JPM).
The U.S. earned a net of $1.5 billion from its sale of Bank of America warrants. It earned a net of $936 million from its sale of J.P. Morgan warrants.
Still, behind those two auctions, the Wells Fargo auction is the third highest earner for the U.S. Treasury.
Overall, however, Wells Fargo is the fifth-highest earning warrant transaction for the Treasury. The Treasury earned more directly selling warrants back to Goldman Sachs and Morgan Stanley than it did from the Wells Fargo auction.
The Treasury earned $1.1 billion from selling warrants to purchase shares of Goldman stock back to the bank and $950 million from selling warrants to purchase Morgan Stanley shares back to Morgan Stanley.
Wells Fargo, among the largest banks to participate in the TARP, received $25 billion in taxpayer funds in late 2008. The San Francisco-based bank repaid the funds last December.
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; [email protected]
(END) Dow Jones Newswires
May 21, 2010 11:00 ET (15:00 GMT)