Why did BAC share price fall on recent news?
This may sound naive, but I had a question about the recent BofA news concerning the Company's request for more bailout funds. It is my understanding that when the government bailout was announced and individual banks received bailout funds, the market values of investment banks increased. Now that BofA is requesting more for the Merrill merger, why would their share price fall? Wouldn't receiving more funds improve their balance sheets resulting in an increase in share price?
My best guess would be that asking for additional bailout money worries shareholders about the overall strength of the company. Is this correct?
There's also the prospect of dilution for existing shareholders, which I imagine is a major concern.
Good question. I would also like to get people's opinions.
Shareholders likely face dilution; additionally, the request for bail money calls into the question the strength of BofA as well as its management and board's judgment.
Quite frankly purchasing Merrill at a premium was beyond stupid.
Also, banks requesting more money from TARP will [likely] be subject to making it clear how it's being used. This would seem to put any bank requesting more money from TARP at a significant disadvantage to it's peers.
BofA basically admitted the firm would be insolvent w/o additional TARP funding
Additionally, JPM's surprise profit in the face of the losses that BAC and C have/will have also weighed on them. As has speculation after Citi's breakup that BAC is following Citi's path of becoming overbloated and unmanageable as a 'money supermarket'.
and someone offers you medicine then most people would describe that as a good thing.
if people think you are better and you say, i think I am going to need way more medicine. that is probably a bad thing.
how are you confused?
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