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

See all articles by Linus Wilson

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Date Written: July 17, 2009

Abstract

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

Wilson, Linus, Should Goldman Sachs and Morgan Stanley Try to Get Half Price on the TARP Warrants? (July 17, 2009). Journal of Finance and Accountancy, Vol. 2, No. 6, pp. 1-8, 2009. Available at SSRN: https://ssrn.com/abstract=1435603 or http://dx.doi.org/10.2139/ssrn.1435603

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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