Back in the 1990s, Washington Mutual, Inc. (NYSE: WM) was a big home run for the founder of TPG, David Bonderman. So, when he structured a $7 billion capital raise for the company in April, it seemed like a sign that the smart money had some keen insight, right?
However, in today's wacky market, nothing seems to work out. For example, TPG's investment price was $8.75 per share. Keep in mind that this was a 33% discount to the current market price (there were also warrants to purchase 57.1 million more shares at $10.06 each).
What's more, TPG was savvy enough to negotiate a juicy anti-dilution clause; that is, if Wamu's stock price fell, the fund would get more shares.
The problem: with the plunge in Wamu's stock (to $2.12 per share), there will be a deluge of more shares to hit the market.
Well, according to a piece in the NY Times, it looks like TPG is going to forgo the antidilution clause (assuming the company needs to raise more capital, which seems like a good bet). Unfortunately, this is yet another sign of the rapid deterioration of the financial sector – and how the so-called "smart money" can get things very wrong.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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