WaMu: What Now??

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On my way to Seattle this morning to monitor Washington Mutual. Seattle is seeing many of its economic crown jewels take a hit.

There's a strike threat at Boeing, Starbucks is trying to recapture the mojo for its joe, Microsoft faces ever new challenges, and WaMu may go from the nation's largest thrift to...?

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Someone sent me the enclosed image.

Here are some quick analyst notes on WaMu:

Merrill Lynch says TPG needed to waive restrictions on capital raising to make any deal possible. "We believe any possible suitor would have balked at making TPG whole at $8.75." The strings attached to TPG's $2 billion investment last spring would have given it protection against diluting the value of its shares if WaMu sold more than $500 million of common stock below $8.75, or the company was sold at a price below $8.75 a share. "We suspect the additional cost would have been a deal-breaker and would possibly have encouraged potential suitors to wait for regulatory action to solve the matter," says Merrill (a brokerage which itself was sold over the weekend).

The report suggests "a deal for WM could be struck in the $2-$3 per share range," though "We maintain our Underperform rating and our $1 price objective, as we suspect there is some urgency to completing a transaction."

One other report I found interesting. ValuEngine has Washington Mutual at a Strong Sell. That's even though "we believe that WM should be trading at $3.08. This makes WM 24.71 percent undervalued."

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