Valuing TARP Preferred Stock
Review of Business & Finance Studies, v. 4 (1) p. 17-22, 2013, Forthcoming
Posted: 30 Oct 2012 Last revised: 5 Dec 2012
Date Written: 2012
This is the only paper to provide a valuation framework for untraded Troubled Asset Relief Program (TARP) preferred stock. Up to $8.1 billion of bailout preferred stock, which is currently paying dividends, could be auctioned to investors. The first auction was held in March 2012. This paper provides a framework to estimate future dividend skipping rates and the rating of unrated and untraded preferred stock issues. It provides a valuation model for non-distressed issues. The model in the paper accurately predicted that the auction of MainSource Financial Group (MSFG) would raise about $53 million.
Keywords: Auctions, Bailout, Banks, Capital Purchase Program, Dividends, Hybrid Securities, Preferred Stock, Private Placements, Ratings, TARP, Troubled Asset Relief Program, Valuation
JEL Classification: G01, G21, G28
Suggested Citation: Suggested Citation