Tuesday, August 4, 2009

Financial Stocks & Dilution

Since the financial nightmare of late 2008, financial institutions have engaged in various capital raising ventures. Included in this is an increase in the number of common shares outstanding. Please remember this when bidding up the shares: market capitalization is the product of share price and shares outstanding !!!!!!!!!

For example:

Bank of America

Average common shares issued & outstanding Q2 2009: 6.81 billion

Average common shares issued & outstanding Q2 2008: 4.43 billion

Therefore, today's close of $15.64 per share of common stock is roughly equivalent to a price of $24.04 from 1 year ago (keeping market cap constant).

Not something we are accustomed to thinking about.....

No comments: