Replies to post #37614 on Washington Mutual Preferred fka WAMPQ

[Milk Duds]

Great explanation.

I'd also add that the P's had a much higher dividend than the K's (when it was being paid). Back when we thought JPM would take over the preferred, the P's would do you a lot better dividend-wise.

But people are bewildered by why the ratio of P to K is so far out of whack.

I think they're not seeing the obvious reason. It's because you can't buy as much (dollar-wise) K as you can P. The total face value of all K's is $500,000. The total face value of all P's is $3B.

I mean, look at how much money changed hands in P's and K's on Friday:

P's $374,605 (18,499 shares @ 20.25)
K's $27,419 (30,131 shares @ 0.91)

$27,419 in K's ? That's chicken feed.

If moneyed investors (including the MM's who are accumulating) want preferred, they almost have to buy P's. There aren't enough K's to buy! Or said another way, since K's are scarcer (dollar-wise), you pay a premium to get them.

But in my opinion, it's "silly" to pay the premium (for K's) and get less of a return on your money. I'm quite confident that the P's and K's will be treated exactly the same!

[clawmann]

Bravo. Very nicely summarized (with a bit of a well deserved pointy stick in the eye to boot).

[dmceng]

marayatano

You definately cut the wheat from the shaff. Always appreciate your opinions on this board.

Take Care
David

[dmceng]

marayatano

As a for instance if the waterfall to equity is say 2.5B and the total due to Prefs including TPS is 7.5B, would it be reasonable to expect an equal percetage payout to all three such that Ks get 33% of FV or approx $8.33 per share, Ps get 33% of FV or $333 per share and TPS gets the remaining 33% to split amongst its constituency?

TIA

Take Care
David