Bank of America shareholders on Tuesday approved an increase in the number of the bank's common shares to fund its repayment of government bailout money.
Shareholders voted at a special meeting to raise the number of common shares by 1.3 billion to 11.3 billion. The proposal was approved by 76 percent of the shareholders. Eighty percent of the shareholders voted.
The special shareholder meeting was called after Bank of America in December repaid $45 billion in loans it received during the credit crisis under the government's Troubled Asset Relief Program. The Charlotte, N.C.-based bank said it funded the repayment through a combination of cash on hand and the sale of $19.29 billion of what are called common equivalent securities that would convert into common stock. That stock conversion was subject to shareholder approval and will take place Wednesday morning.
While the meeting was relatively calm, there were some outbursts from the audience.
"You are running this bank into the ground," yelled one shareholder.
When the floor was opened for discussion, others quietly voiced their opposition. Some expressed concerns that the issuance of new shares would dilute, or lessen, the value of their holdings.
"You need to be more forthright with shareholders, because you are diluting our shares here," said shareholder Stephen Gale, of Keyport, N.J. Gale, who owns 14,000 shares, voted against the proposal.
In response, Bank of America CEO Brian Moynihan said that at the time of the common equivalent securities offering in December, Bank of America did not have enough reserve shares to complete a typical common stock sale.
"It caused dilution that the bank really didn't want, but in the context of paying back the government, it was important," Moynihan said. "The decision was very critical for our company to complete and to run this company moving forward."
The meeting, held a block from the company's headquarters in Charlotte, was the first that Moynihan has presided over since becoming Bank of America's chief executive Jan. 1.
The bank's annual meeting of shareholders is expected to take place in April.
Bank of America's shares fell 35 cents, or 2.2 percent, to $15.85 in afternoon trading. The overall stock market was sharply lower on concerns about consumer spending.