Trading BofA As It Wriggles Free From TARP
On Wednesday's Fast Money, CNBC on-air editor Charlie Gasparino broke big news about BofA. He told the desk that Bank of America is going to repay $45 billion and get out of the TARP program.
And to do it, Bank of America will use $26.2 billion in available cash and will also sell $18.8 billion in preferred stock - with the offering coming on Monday, Gasparino said.
That's a major shift. How should you game it?
"If there is any kind of equity offering I would be a buyer of that offering," said Fast Money trader Joe Terranova. "BofA sets up nicely going into 2010. I think these developments give investors more reasons to be a fan of Bank of America."
And if you're an individual investor who doesn't have access to buying preferred shares, Terranova had another trade - and it's simple. "I think you can just get long, it should go above $20."
Or if you want to play the announcement more broadly Steve Grasso added "(in the morning) I think the move is seen as a positive by the market."
And on a related note, Pete Najarian told the desk -- I think Wells Fargo is next. They also want to get out of TARP.
What else should you know?
This is Ken Lewis’ last act as CEO and I think it’s a big deal, said Gasparino. It moves BofA out of the government strangle hold. This was the thing he wanted to get done before he left.
(The move allows Bank of America to free itself from government restrictions on executive pay as well as other restrictions that come along with bailout funds.)
And it was Greg Curl's team who pulled it off. That suggests to me that Curl is now the most likely guy to become BofA's new CEO, concluded Gasparino.
What do you think? We want to know!
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Trader disclosure: On December 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (SU), (GOOG) ; Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (PLCE), (MSFT), (WMT), (PDE), (RIG), (TGT); Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO), (UNG; Grasso Owns (AAPL), (BA), (BAC), (C), (WMT), (V); Najarian Owns (AAPL) Call Spread; Najarian Owns (BRCD) & (BRCD) Calls; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (DELL) Calls; Najarian Owns (DE) Call Spread; Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (UAUA) Call Spread
For Steve Grasso:
Stuart Frankel Owns (NWS),
Stuart Frankel Owns (PDE)
Stuart Frankel Owns (SDS)
Stuart Frankel Owns (YHOO)
Stuart Frankel is Short (QQQQ)
Funds Managed By Todd Gordon Are Short Eur/ Dollar
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