When To Hold 'Em, When To Fold 'Em
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Already cash-strapped and struggling under the weight of sub-prime mortgage debts, Wachovia could be forced to shell out big bucks if Prudential opts to sell back its stake in the bank as part of a joint-venture deal the two firms struck in 2003, says a story in today’s New York Post. According to the terms of their agreement, Wachovia can opt to exercise that right starting tomorrow.
On the other hand, it could increase its stake in Wachovia back to the 38 percent it originally owned under the terms of the deal. That stake was diluted to 23 percent after Wachovia bought A.G. Edwards last year. It is currently valued at $5 billion.
In April, Wachovia reported a $707 million first-quarter loss and was forced to cut its dividend 41 percent. The Charlotte Observer reports that Wachovia shares may have been negatively affected by a recent analyst report hinting that another dividend cut is on the horizon for the retail brokerage firm. To boot, the Observer states that Wachovia’s stock fell under $15 a share yesterday, eventually hitting $15.29 by mid-afternoon.
