vinod1 Posted November 18, 2014 Share Posted November 18, 2014 You might be using different prices, but if we use the current prices Stock $60.76 Warrant $19.37 Time Value is: $42.42 + $19.37 - $60.76 = $1.03 Dividend threshold: $1.52 So we are paying $2.55 to borrow $42.42 or 6% if time value goes to zero in a year. As long as time value does not become negative then the max borrowing cost for warrants is 6%. Am I missing something? Vinod If we are comparing warrant against buying stock on the margin and buying put to hedge the strike, shouldn't the max borrow for 1 year be 2.55/60.76 or 4.2%? Also since expiry of warrant is 4 years away, shouldn't you be using 1/4th of the time value to compute borrow cost (this assumes time value goes to zero over the entire life instead of in the next one year). If it goes to zero in the next one year then borrow cost for next 3 years would be only 2.5% p.a. If we are comparing warrant against buying stock on the margin and buying put to hedge the strike, shouldn't the max borrow for 1 year be 2.55/60.76 or 4.2%? No. Think of it this way, you are funding an asset purchase of $60 with a down payment of $20 and borrowing $40. So you would calculate the cost of leverage based on $40, the amount you actually borrow, not the total purchase price. Also since expiry of warrant is 4 years away, shouldn't you be using 1/4th of the time value to compute borrow cost (this assumes time value goes to zero over the entire life instead of in the next one year). If it goes to zero in the next one year then borrow cost for next 3 years would be only 2.5% p.a. Eric mentioned that cost of leverage could go as high as 10%, if the cost of leverage drops in future years. I am just pointing out that in the worst case, we could end up paying the full $1.03 in one year and in that case the cost of leverage in that year would be 6%. We should be using $0.25 each year assuming it would be the same each year. Even this does not really give an accurate picture since we are prepaying the $0.25 interest at the beginning of the term, so to be accurate we need to estimate the time value of the interest payment as well. In this case, the interest amount is pretty small so it does not change the leverage cost significantly. Vinod Link to comment Share on other sites More sharing options...
vinod1 Posted November 18, 2014 Share Posted November 18, 2014 Eric had in a series of posts on BAC, detailing all this out. I am just reprinting what he has explained several times. If you are interested read the BAC Warrants and BAC leverage threads. Vinod Link to comment Share on other sites More sharing options...
meiroy Posted November 19, 2014 Share Posted November 19, 2014 The TARP warrants give you a total stock return when the dividend is over the threshold (which it already is, in case of JPM). Pardon, I do not understand this sentence... it is not adjusted by the entire common dividend amount, JPM site has the details. Anyhow, ERICOPOLY has the whole cost thing on his thread, my question was more like: it's 2016 and the 2019 C LEAPS are out. You own the warrants. What are you going to do? Link to comment Share on other sites More sharing options...
rpadebet Posted November 19, 2014 Share Posted November 19, 2014 The TARP warrants give you a total stock return when the dividend is over the threshold (which it already is, in case of JPM). Pardon, I do not understand this sentence... it is not adjusted by the entire common dividend amount, JPM site has the details. Anyhow, ERICOPOLY has the whole cost thing on his thread, my question was more like: it's 2016 and the 2019 C LEAPS are out. You own the warrants. What are you going to do? That is what I meant. Strike is adjusted downward and conversion factor upward factoring the excess dividend over the threshold. Strike has been adjusted down to 42.39 from 42.42 due to the extra 2 cent dividend last couple of quarters. You consider the dividend threshold as cost of leverage and everything else above that you get that return as well unlike in a LEAP. Regarding your second question, in 2016, what I would do with the warrants would depend on how attractive I think the underlying stock is at that point. If nothing changes and it is at similar valuation, compare the costs implied by warrants and call like now. Beyond that time period, I guess its the LEAPs Link to comment Share on other sites More sharing options...
Liberty Posted December 5, 2014 Share Posted December 5, 2014 Jamie Dimon, JPMorgan Chase’s chief executive, announced to his staff on Friday that his doctors have found no evidence of cancer in his body, a few months after he concluded treatment for throat cancer. http://dealbook.nytimes.com/2014/12/05/jamie-dimon-says-no-evidence-of-cancer/ Happy for him! Link to comment Share on other sites More sharing options...
Liberty Posted February 27, 2015 Share Posted February 27, 2015 http://brooklyninvestor.blogspot.ca/2015/02/jpm-investor-day-2015.html Link to comment Share on other sites More sharing options...
dcollon Posted March 11, 2015 Share Posted March 11, 2015 JPMorgan Chase Plans Dividend Increase and $6.4 Billion Capital Repurchase Program Wednesday, March 11, 2015 JPMorgan Chase & Co. (NYSE:JPM) announced today that the Federal Reserve Board had informed the Firm that it does not object to the Firm’s adjusted 2015 capital distribution plan and that the Firm’s Board of Directors intends to increase the quarterly common stock dividend to $0.44 per share (up from the current $0.40 per share), effective the second quarter of 2015, and to authorize the repurchase of up to $6.4 billion of common equity between April 1, 2015, and June 30, 2016. The equity repurchase program would include shares repurchased to offset issuances under the Firm’s equity-based compensation plans. Jamie Dimon, Chairman and CEO of JPMorgan Chase said: “We are pleased that our Board intends to raise the dividend and continue our equity buyback program.” The Firm’s dividends will be subject to the Board’s approval at the customary times those dividends are declared. The Board intends to formally authorize the equity repurchase program at its next meeting on March 17, 2015. The 2015 second quarter dividend, which the Board intends to increase to $0.44 per share, would be for shareholders of record on July 6, 2015, payable on July 31, 2015. The timing and exact amount of common equity purchased will be consistent with the Firm’s capital plan and will depend on various factors, including market conditions, the Firm’s capital position, internal capital generation, alternative investment opportunities, and legal and regulatory considerations; the Firm’s repurchase program does not include specific price targets or timetables, and may be executed through open market purchases or privately negotiated transactions, including the use of Rule 10b5-1 programs, and may be suspended at any time. Link to comment Share on other sites More sharing options...
txlaw Posted April 8, 2015 Share Posted April 8, 2015 2014 Annual Report is out: http://files.shareholder.com/downloads/ONE/3459833856x0x820066/f831cad9-f0d8-4efc-9b68-f18ea184a1e8/JPMC-2014-AnnualReport.pdf Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 10, 2015 Share Posted April 10, 2015 Just the letter: http://files.shareholder.com/downloads/ONE/15660259x0x820077/8af78e45-1d81-4363-931c-439d04312ebc/JPMC-AR2014-LetterToShareholders.pdf Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 10, 2015 Share Posted April 10, 2015 Anyone who is following the financials more closely, can you shed some light on the huge preferred issuance in 2014 (and smaller but still large in 2013)? Link to comment Share on other sites More sharing options...
racemize Posted April 10, 2015 Share Posted April 10, 2015 Anyone who is following the financials more closely, can you shed some light on the huge preferred issuance in 2014 (and smaller but still large in 2013)? I think one of the capital requirements incentivized it, though I forget which one. His comments on the liquidity crunch were very interesting. Link to comment Share on other sites More sharing options...
oddballstocks Posted April 10, 2015 Share Posted April 10, 2015 Anyone who is following the financials more closely, can you shed some light on the huge preferred issuance in 2014 (and smaller but still large in 2013)? I think one of the capital requirements incentivized it, though I forget which one. His comments on the liquidity crunch were very interesting. They swapped their TruPS for preferred stock. With the new capital requirements TruPS don't count towards capital requirements as much as preferred stock does. Link to comment Share on other sites More sharing options...
oddballstocks Posted April 10, 2015 Share Posted April 10, 2015 Here's a text about it: http://www.cgsh.com/files/News/9b24360c-6dc2-4bd8-8527-b74c173ace0e/Presentation/NewsAttachment/5096cc9b-167b-4bdc-b102-b9cc506bde1f/Final%20Capital%20Rules%20Adopted.pdf Key takeaway: "In addition, banking organizations with less than $15 billion in total assets will not be subject to the phase-out of non-qualifying Tier 1 capital instruments, such as trust preferred securities (“TruPS”) and cumulative preferred securities, which should further reduce the burden of compliance with the Final Rule on smaller institutions." Phase in happened in January 2015. I attached a chart and table showing TruPS/Preferred for JPM since 2012. Link to comment Share on other sites More sharing options...
morningstar Posted April 10, 2015 Share Posted April 10, 2015 Anyone who is following the financials more closely, can you shed some light on the huge preferred issuance in 2014 (and smaller but still large in 2013)? New bank capital regulations imply large-cap names like JPM should hold at least 1.5% of RWA in preferred equity (the alternative is to hold that same amount in incremental common equity). They were raising themselves toward that level as well as offsetting the significant amount of old-style TruPs they called. They still have a little more wood to chop on the preferred front - they've done $1.4bn thus far in 2015 and have $3-4bn of additional need. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 10, 2015 Share Posted April 10, 2015 Great, thanks for the info guys. Liq remark was interesting: Some investors take comfort in the fact that spreads (i.e., the price between bid and ask) have remained rather low and healthy. But market depth is far lower than it was, and we believe that is a precursor of liquidity. For example, the market depth of 10-year Treasuries (defined as the average size of the best three bids and offers) today is $125 million, down from $500 million at its peak in 2007. The likely explanation for the lower depth in almost all bond markets is that inventories of market-makers’ positions are dramatically lower than in the past. For instance, the total inventory of Treasuries readily available to market-makers today is $1.7 trillion, down from $2.7 trillion at its peak in 2007. Meanwhile, the Treasury market is $12.5 trillion; it was $4.4 trillion in 2007. The trend in dealer positions of corporate bonds is similar. Dealer positions in corporate securities are down by about 75% from their 2007 peak, while the amount of corporate bonds outstanding has grown by 50% since then Btw am I the only one who thought certain parts of his letter really gave a Buffett impression? Link to comment Share on other sites More sharing options...
jay21 Posted April 10, 2015 Share Posted April 10, 2015 Btw am I the only one who thought certain parts of his letter really gave a Buffett impression? Haven't read this one yet, but his past letters are definitely influenced by Buffett: he constantly stresses price/value for buybacks, the benefits of being a conglomerate, and capital allocation. If anyone were to replace Buffett outside of BRK, Jamie would probably be a top choice for me. Link to comment Share on other sites More sharing options...
Liberty Posted April 14, 2015 Share Posted April 14, 2015 http://brooklyninvestor.blogspot.ca/2015/04/jpm-annual-report-2014.html Link to comment Share on other sites More sharing options...
phil_Buffett Posted April 14, 2015 Share Posted April 14, 2015 http://files.shareholder.com/downloads/ONE/4075023986x0x820982/B1C3141D-D2F0-410D-B6AF-8856898871B1/1Q15_Earnings_Press_Release_FINAL.pdf Link to comment Share on other sites More sharing options...
dcollon Posted July 10, 2015 Share Posted July 10, 2015 Jamie Dimon Presentation Link to comment Share on other sites More sharing options...
Arden Posted July 21, 2015 Share Posted July 21, 2015 Fed set to finalize extra capital requirements for big banks, with J.P. Morgan facing highest increase: http://www.wsj.com/articles/fed-set-to-finalize-amount-of-capital-big-banks-must-maintain-1437410401 Link to comment Share on other sites More sharing options...
John Hjorth Posted February 11, 2016 Share Posted February 11, 2016 JPMorgan's Dimon buys more than $25 million of company stock: www.reuters.com/article/us-jpmorgan-ceo-stock-idUSKCN0VK2KL Link to comment Share on other sites More sharing options...
Viking Posted February 12, 2016 Share Posted February 12, 2016 Dimon certainly has a flair for the dramatic; this certainly is a large purchase. Nice signal to send before JPM investor day on Feb 22 (I think). Also sends positive message to employees. Link to comment Share on other sites More sharing options...
Picasso Posted February 12, 2016 Share Posted February 12, 2016 I'm hoping Moynihan tries to match this and buys up $50k worth of BAC stock. It would be too perfect. Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 12, 2016 Share Posted February 12, 2016 I'm hoping Moynihan tries to match this and buys up $50k worth of BAC stock. It would be too perfect. ;D ;D ;D ;D Link to comment Share on other sites More sharing options...
sleepydragon Posted February 12, 2016 Share Posted February 12, 2016 I'm hoping Moynihan tries to match this and buys up $50k worth of BAC stock. It would be too perfect. ;D ;D ;D ;D urgh! I just sold half of my JPM to get capital loss and used the proceed to buy BAC. Link to comment Share on other sites More sharing options...
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