Societe Generale, in trouble because of losses suffered due to transactions by one trader, will raise almost $8 billion. The rights offering is at an astonishing 39% discount to the price as of the Friday close.
According to The Wall Street Journal, "the bank also said write-downs linked to fallout from the U.S. subprime-debt crisis would be €2.6 billion, compared with the €2.05 billion announced in January." In other words, it is in deep distress.
A sale of shares at a 39% discount raises a question about the valuation of US banks, should they be put in a position to raise more money due to larger subprime write-offs or write-downs in their LBO portfolios. American money center banks may have to take more losses in the early quarters of this year as a recession further devalues some of their assets.
To put it in stark relief, a rights offering at Citigroup (NYSE:C) at a 39% discount would price shares at $16 compared to their current $26 level which is down from a 52-week high of $55.55.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
2-11-2008 @ 6:47AM
al coholic said...
I'd buy Citi shares at $16 all day long!
2-11-2008 @ 7:14AM
Rob said...
I agree. Check this out
http://wallastoninvestments.com/the-second-week-of-february-starting-on-a-bearish-note