The finer details of the deal is important. BofA has not bought any stock yet. They have given a loan under the guise of preferred stock with no voting rights. And they borrowed
(part of) the money from the Federal Reserve to do it.
Note that the implied dilution is 2B/18=111M shares or 17% when and if the time comes.
Note also how short-lived the epuhporic spike in the stock price was this morning. By now, the gain is down to $1,
and it was even lower earlier.
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Under the terms of the deal, Charlotte, N.C.-based Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually, Countrywide said. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions. That is 2B/18=111M shares or dilution of 17% when and if the time comes.
If Bank of America were to convert its shares under Countrywide’s current share count, it would hold between 16 percent to 17 percent of Countrywide shares, said Robert Stickler, a Bank of America spokesman.
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Citigroup Inc., Bank of America Corp., J.P. Morgan Chase & Co. and Wachovia Corp. — the nation’s largest banks as measured by total assets — said they each borrowed $500 million from the so-called discount window.
