Treasury draws $936m from JPMorgan warrants - Auction ends government investment in the US bank

Treasury draws $936m from JPMorgan warrants - Auction ends government investment in the US bank
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: December 11 2009 17:20 | Last updated: December 11 2009 17:20
http://www.ft.com/cms/s/0/2e72a436-e677-11de-98b1-00144feab49a.html


US taxpayers will reap $936m from the Treasury’s sale of warrants it had received from JPMorgan, which the government demanded after bailing out US banks last year.

On Friday the US Treasury said that it bought 88.4m warrants to purchase JPMorgan common stock at the price of $10.75 per warrant, concluding the government’s investment in the bank. The price was determined through a Dutch-style auction.

“These proceeds provide an additional return to the American taxpayer from the Treasury’s investment in the Company beyond the dividend payments it received on the related preferred stock,” the Treasury said in a statement.

By purchasing the warrants, investors have the option to buy common stock at a specified price for 10 years from the date the shares were issued. The $936m was less than some analysts were expecting the Treasury to receive for the warrants.

Last week the Treasury received $146.5m for Capital One’s warrants, in the first such auction since the $700bn Troubled Asset Relief Program was launched to help rescue the financial system. JPMorgan received $25bn through Tarp and repaid the funds last June.

Earlier this month rival Bank of America said it would repay $45bn in US bail-out funds, leaving US taxpayers with a 3.6bn profit from dividends from the investment. Analysts estimate that the Treasury could bring in as much as $1.3bn from the 211 BofA warrants it holds.

Shares of JPMorgan fell 1.14 per cent to $40.80 in midday trading on Friday.