It has been a while since I have given my opinion on this board, but your post has me wishing to insert my $.02 here. Many will not like this, but those who have followed any posts of mine (on any board) can attest to the fact I shoot straight from the hip. So here goes...
First, let me clearly state that I do not believe $1.88 Billion was a reasonable "purchase price" for Washington Mutual. I do not believe anyone with any common sense believes that was the best price the FDIC could have gotten from JPM for WM, especially in light of the interest shown by JPM to acquire WM before the bank showed signs of alleged distress.
That said, however, neither do I believe that $8 should have been the starting point of the negotiations. That price was offered in June 2008. While the DOW and economy was starting to show signs of recession, it was undoubtedly stronger in June than it was on September 25th.
WAMU had every right to turn down JPM's offer in June. In my opinion, they should have. The stock was trading above the offer price. What I question is should they have countered at a price slightly higher than current trading levels rather than turned the offer down flat? Did they assess the strength of the company to continue should signs of recession continue? This, I do not have the answer to.
However, the fact remains that leading to the actual seizure, the stock was trading between $4 and $4.50. I think THAT is the value baseline that should have been utilized by the FDIC in negotiating with JPM or any other "suitor." You wanted WM in June for $8, we are offering to sell it to you at $4. Yes or no?
There are many that will disagree. I understand that. For the non-pension stockholders, the bottom line is they had a choice to sell. At any point from their initial buy-in price, they could sell. Some--like me--chose to hold. Whether it was a belief in WM to overcome, whether it was based on assertions by the company that they were in no immediate danger of collapse, whether it was knowledge that JPM's prior offer had not been accepted leading to perceived business strength, whether it was due to the infusion of cash by TPG, whatever the individual investors decision...there was the ability to buy and there was the ability to sell.
I have asserted that when everything was settled, it was (and still is) my belief the commons will be worth between $2-$4 per share. I also stated this would most likely be a long drawn-out matter, lasting 2-3 years, possibly longer.
The questions I cannot answer nor anyone else on this board with 100% certainty is whether the commons will be privy to added value because of:
1. The actual price negotiated between the FDIC and JPM
2. The time frame that FDIC made the offer to JPM in terms of when WM was seeking to "sell itself."
3. The fact that JPM had clearly represented a desire to purchase all of WM less than 6 months before
4. That WM was not on the no-short list
5. That WM was seized on a Thursday, a week before TARP funds were authorized to assist banks (regardless of those distributions taking place in late October, the public was less inclined to make runs on the bank knowing that legislation was in place to protect their deposits)
6. That comments were made and documented that WM would be sorry for not accepting the JPM offer
7. Etc. Etc. Etc.
And of course, because we cannot know with absolute certainty the final outcome, there is always the risk that the stock will have no value.
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