Saturday, May 2, 2009

The Coming Nationalization of Bank of America?

BofA might need to convert $45 billion in government preferred shares into common equity, based on government demands following stress test "results," according to FT.

The current market capitalization of BofA is $45 billion. It is not clear as to exaclty what price a conversion would take place at. However, a conversion of preferred stock into common done at the current market price would result in the government owning approximately 40% of the bank.

It should be noted that there is no financial justification for a converison.

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