[quote SK in CV]Simple answer, no, it would not necessarily be true that when BofA issues $400 million in shares it would substantially dilute the value of existing shares. I don’t know what their current status is with regards to shares issued and outstanding, but let’s assume for a moment that they need to raise $400 million.[/quote]
It looks like the sale is of newly issued shares. There seems to be some part on the issuance being tied to the repurchase of preferred shares, and “junior subordinated debt”. The amount is 400 million shares for approximate proceeds of $2.6 Billion.
It is worth looking into. If the repurchase is happening when the junior subordinated debt is heavily discounted (beyond what might be justified) then it could be a good move for BofA. Something that needs some digging into.
As for dilutive effect, it occurs dilutive against earnings per share, revenue per share, and voting but not value since the equal $ value is received on the sale (note: this may not exactly be true due to how such stock sales are handled. Someone like GS might purchase or ‘broker’ all of the entire 400mil shares to be issued, but at a discount. GS then may or may not slowly sell onto the open market, capturing the difference.). As SK in CV mentioned, the new share issuance itself can move the market.. as well as the sale onto the market of these shares. Both are most likely in the downward direction.
