First Republic Bank’s “Rescuers” Had Underwritten $3.6 Billion of its Preferred Shares, Which Have Lost 65 to 70 Percent of their Value Year-to-Date
g at xny.io
Wed Apr 12 07:23:43 PDT 2023
By Pam Martens and Russ Martens: April 12, 2023
Year-to-Date Trading in First Republic Bank Preferred SharesFour of the
eleven big banks that announced on March 16 that they were going to dump a
combined $30 billion of their own money as uninsured deposits into the
plunging coffers of First Republic Bank were also the underwriters of $3.6
billion in preferred stock for First Republic Bank. Units of JPMorgan
Chase, Bank of America, Morgan Stanley and Wells Fargo were underwriters of
the majority of the preferred stock outstanding at First Republic Bank.
UBS, which did not contribute to the $30 billion deposit infusion, was also
one of the primary underwriters. UBS was otherwise occupied last month by
having a gun put to its head by the Swiss government to “rescue” the
tanking Credit Suisse. The Swiss government also denied shareholders on
both sides of the deal the ability to vote on the matter.
All of First Republic’s outstanding preferred stock was issued at $25 a
share. Year-to-date those shares have lost 65 to 70 percent of their market
value. As of yesterday’s closing bell, the seven series of Preferred
(Series H through N) closed between $5.86 and $6.52. (See chart above.)
Not only has investors’ principal taken a big hit in these shares, but last
Friday the bank announced that it was suspending dividend payments on all
of its preferred stock series. First Republic Bank had previously announced
the suspension of its dividend on its common stock on March 16. The common
stock has plunged in value by 91 percent over the past 12 months. First
Republic’s common stock market value stood at $29.12 billion on March 31,
2022. At yesterday’s closing price of its common stock at $14.13, its total
market value stood at $2.64 billion.
Adding more potential liability to the “rescuers” of First Republic Bank is
the fact that in this year’s and last year’s secondary offerings of common
stock for First Republic – at dramatically higher prices than where the
common stock trades today – units of the following bank rescuers
participated as underwriters: JPMorgan Chase, Bank of America, Goldman
Sachs and Morgan Stanley.
The Chairman and CEO of JPMorgan Chase, Jamie Dimon, has been given much
media credit for the $30 billion “rescue” plan for First Republic Bank,
notwithstanding the fact that S&P Global downgraded the credit rating on
First Republic deeper into junk territory just three days after this plan
was announced. There is also the troubling reality that the common stock
share price continued to plunge after the rescue plan was announced and
investment advisors in its wealth management unit have continued to flee,
taking billions in assets with them to competitors.
Given all this, investors might be forgiven for asking themselves if
Dimon’s plan was a “rescue” or a box of explosives on a time delay.
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