A set of Bank of America Corp. bailout warrants surged 33% in the first three weeks of trading, topping gains over a similar span following sales of securities tied to JPMorgan Chase & Co. and Capital One Financial Corp.
Bank of America's Group B warrants, which the government auctioned for $2.55 each on March 3, finished at $3.40 Thursday on the New York Stock Exchange — a 33% jump. The Group A warrants, which sold for $8.35 apiece, closed Thursday at $9.53, a 14% gain for the winning bidders.
The Treasury Department sold the 10-year warrants in a record-setting $1.57 billion auction to recoup some costs of the Troubled Asset Relief Program for taxpayers. Bidders were betting that they could replicate gains posted after auctions of JPMorgan Chase and Capital One Tarp warrants, which rose more than 30% in 30 days.
"For people who were able to buy on the issuance it's a win," said Steve Sosnick, equity risk manager at Timber Hill LLC, the market-making unit of Interactive Brokers Group Inc. in Greenwich, Conn., adding that warrant holders have done better than common stockholders. "People like buying Bank of America as a company and making a long-term investment in a leveraged manner."
Common shares of Bank of America gained 8% since the auction through Thursday. The stock closed Friday at $TK per share.
Holders of the Group B warrants may convert them into an equal number of common stock at $30.79 each until October 2018. The Group A warrants may be exchanged at $13.30 and expire in January 2019.
JPMorgan Chase's Tarp warrants, auctioned Dec. 10 for $10.75 apiece, climbed as much as 24% in the first three weeks of trading. The warrants of Capital One that were sold Dec. 3 for $11.75 and advanced as much 19% in the same span.
"We are putting Tarp to rest," Treasury Secretary Tim Geithner told the American Enterprise Institute on March 22. "We're putting Tarp out of its misery having used only a fraction of the resources authorized, by the Congress, and having returned almost $200 billion — in capital, dividends, and interest, proceeds and warrants — to reduce our debt and future deficits."