Valuing the First Negotiated Repurchase of the TARP Warrants

31 Pages Posted: 14 May 2009 Last revised: 21 Oct 2009

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Date Written: October 18, 2009

Abstract

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.

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

Suggested Citation

Wilson, Linus, Valuing the First Negotiated Repurchase of the TARP Warrants (October 18, 2009). Available at SSRN: https://ssrn.com/abstract=1404069 or http://dx.doi.org/10.2139/ssrn.1404069

Linus Wilson (Contact Author)

University of Louisiana at Lafayette - College of Business Administration ( email )

Department of Economics & Finance
214 Hebrard Blvd., Room 326
Lafayette, LA 70504-0200
United States
(337) 482-6209 (Phone)
(337) 482-6675 (Fax)

HOME PAGE: http://www.linuswilson.com

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