Should Goldman Sachs and Morgan Stanley Try to Get Half Price on the TARP Warrants?
Journal of Finance and Accountancy, Vol. 2, No. 6, pp. 1-8, 2009
17 Pages Posted: 18 Jul 2009 Last revised: 6 Jan 2010
Date Written: July 17, 2009
The cancellation provisions in the Troubled Asset Relief Program (TARP) warrant agreements loom large for the investment banks Goldman Sachs and Morgan Stanley. These banks could gain hundreds of millions of dollars by issuing equity to satisfy the cancellation provisions of the TARP warrant agreements. Nevertheless, they could maximize the value of these provisions by postponing an equity issuance if they could afford to wait to unwind the TARP investments.
Keywords: bailout, banks, banking, Capital Purchase Program, EESA, Emergency Economic Stabilization Act, options, TARP, Troubled Asset Relief Program, valuation, warrants
JEL Classification: G01, G13, G21, G28, G32, G38
Suggested Citation: Suggested Citation