May 27, 2009

Bank of America's very successful $13.5 billion capital raise last week was probably driven primarily by its biggest investors.These sales are executed by the bank's underwriters, who, after being called upon by the bank, contact its largest holders and to find how much they want out of the deal."In some cases the holders take all of the deal, but in most cases some shares are opened to the public.

Nonetheless, by the time these deals are announced they're already sold to the primary holders of the stock," said Richard Bove, vice president of equity research at Rochdale Research. Bove argued in a recent report that excessive capital, excessive liquidity, and excessive reserves have made the beleaguered industry stronger than ever, and will bring about explosive earnings growth and unusually strong stock price performance.