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Valuing Tarp Preferred Stock

Author

Listed:
  • Linus Wilson

Abstract

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.

Suggested Citation

  • Linus Wilson, 2013. "Valuing Tarp Preferred Stock," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 4(1), pages 17-22.
    • Handle: RePEc:ibf:rbfstu:v:4:y:2013:i:1:p:17-22
    as

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    File URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v4n1-2013/RBFS-V4N1-2013-2.pdf
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    References listed on IDEAS

    as
    1. Wu, YiLin, 2004. "The choice of equity-selling mechanisms," Journal of Financial Economics, Elsevier, vol. 74(1), pages 93-119, October.
    2. FranÁois Derrien & Kent L. Womack, 2003. "Auctions vs. Bookbuilding and the Control of Underpricing in Hot IPO Markets," The Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 31-61.
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    Cited by:

    1. Linus Wilson, 2013. "TARP’s deadbeat banks," Review of Quantitative Finance and Accounting, Springer, vol. 41(4), pages 651-674, November.

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    More about this item

    Keywords

    Auctions; Bailout; Banks; Capital Purchase Program; Dividends; Hybrid Securities; Preferred Stock; Private Placements; Ratings; TARP; Troubled Asset Relief Program; Valuation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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