Will Cap One Drink Its Own Kool-Aid?

  • JJ Hornblass
  • December 2, 2009
  • 0

Yesterday, the Treasury put up more than 12 million warrants for Capital One Financial Corp. stock for sale at an exercise price of $43.13.

So who’s a possible buyer of the warrants? Try Cap One. Cap One writes in its prospectus:

We will be allowed to bid in the auction. If we decide to bid, we will participate on the same basis as all other bidders without receiving preferential treatment of any kind. We will be required to submit any bids we make through the auction agent. The submission of issuer bids may cause the clearing price in an auction to be higher than it would otherwise have been absent such bids.

As the prospectus states, an exercise price of $43.13 per share means Cap One’s “stock price would have to be more than $49.63 for [the investor] to have an opportunity to exercise the warrants and achieve a positive return on … investment.” (Deutsche Bank is running the secondary offering for Treasury.)

COF closed today at $38.35 per share. I can see the spreadsheets churning already.

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at hornblass@gmail.com or 212-564-8972.

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