When Washington Mutual Inc.'s management announced the
terms of its deal to raise $7 billion in capital by selling stock to a TPG Capital-led consortium, many shareholders were outraged by the heavy dilution and the bargain price the private equity firm was getting. But the buyout firm's effort to catch the falling knife appears to have backfired thus far, as the Seattle lender has continued to take a beating.
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According to Bloomberg, two-thirds of the investment's value
has already been wiped out
since the deal was announced in April. Shares suffered their worst
decline ever Monday, falling 34.7% to a $3.23 close, leaving the
value of TPG's investment down 63% as Wall Street flees financial stocks.
WaMu sold the TPG-led group new common shares at $8.75, a steep 33%
discount to its $11.77 closing price the day before reaching the agreement. The deal, front
loaded with penalties should it not be approved by shareholders,
diluted existing stockholders by nearly half. TPG still has warrants to
buy 57.1 million shares at $10.06 a piece.
- George White
See Bloomberg story
See TPG/WaMu story on TheDeal.com
