Valuing the First Negotiated Repurchase of the TARP Warrants
University of Louisiana at Lafayette - College of Business Administration
October 18, 2009
Old National Bancorp was the first publicly traded bank to buy back its Capital Purchase Program (CPP) warrants. It paid $1.2 million, which is below the low-end of this paper’s estimates of the fair market value of the warrants. This paper estimates the warrants are worth between $1.9 and $6.9 million. This low negotiated price from the perspective of taxpayers indicates that the U.S. Treasury would have probably gotten a better price marketing those warrants to third party investors.
Number of Pages in PDF File: 31
Keywords: bailout, banks, banking, Capital Purchase Program, Emergency Economic Stabilization Act, financial crisis, options, TARP, Troubled Asset Relief Program, valuation, warrants
JEL Classification: G01, G13, G21, G28, G32, G38
Date posted: May 14, 2009 ; Last revised: October 21, 2009