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Wells Fargo Announces New Preferred Offering

Giant Banker Wells Fargo & Company (WFC) has announced they will be selling a new $25 preferred stock issue.

Nothing unusual about this issue–it will be non-cumulative, qualified and optionally redeemable in 2025.

The banker includes ‘redemption of preferred shares’ in their ‘use of proceeds’ section of the prospectus. The company has 3-4 issues that are currently (or soon will be) redeemable at coupons ranging from 5.125% to 6.0%. With ‘yield talk’ in the 4.75% area it is highly likely the 6.0% WFC-T issue will be redeemed and potentially the 6% WRC-V issue which becomes redeemable on 12/15/2020 will be called–note that all WFC issues can only be redeeemed on a dividend payment date of which the next is 12/15/2020.

All their many issues can be seen here.

The permanent ticker will be WFC-A when it hits the NYSE and will trade on the OTC grey market prior to the permanent exchange, but the OTC grey market ticker has not yet been announced.

The preliminary prospectus can be found here.

Eugene was right on this one.

19 thoughts on “Wells Fargo Announces New Preferred Offering”

  1. Does anyone have any idea why the price disparity between wfc-t and wfc-v of nearly 30 cents when they are the same coupon and will both be callable on 12/15/20? Shouldn’t they be trading near the same price, what am I missing?

  2. I would not want to be the investment banker that has to explain why Wells has to pay so much more than US Bank Corp. At that, Wells is lucky to only pay 100 basis points more.

    1. WF. 2 things. stress tests, and ethics. They are poor at both. Whenever you have financial incentives for employees based on revenue from customers, there can always be problems with ethics. That is why you reward your employees on different metrics. 🙂

    2. amen: Potter and mr. conservative, I’m not a ratings expert but I am conservative. When I see anything less than BBB+ I stop looking regardless the yields, including JPM”s? This has limited my selection in the past and “definitely” going forward but so be it. I’ll take my chances some where else.

  3. The only person who would buy this IPO over WFC-L yielding ~5.5% is someone who doesn’t know or understand WFC-L.

      1. From the large banks $WFC-L is the only play at this particular time.

        Fortunately, the smaller banks have made some interesting choices available.

        1. @LVTS, please elaborate and share ‘smaller banks with interesting new IPO choices’ you refer to

          1. If you browse through the history of the last few months, you will see the introduction of several new regional banking preferred. I liked Ocean bank as one example. The good ones are already trading in the $26-$27 price range.
            This happened during the summer. Haven’t seen any new issues lately.

    1. What unlikely event can have WFC-L called at par (thus loosing 30%+)?

      Only things I can think of are the unlikely event that it merges / bought by other bank or dissolved by the Govt. for continued mismanagement? Of course like all nice yielding securities, subject to interest rate risks.

      Any more escape or risk?

      1. Msquare, a merger wont trigger it, as the entire genesis of Series L was Wells buying out Wachovia as it was originally a Wachovia issue. Wells had to assume it and the terms.

      2. I don’t think WFC-L can be called in a change of control but I should double check that. The main scenario in which WFC-L can be called is if the common stock goes up like 4x. I forget the exact amount but at some point, WFC can convert the pref to common if it is trading like 30% over the conversion price which in turn is much higher than even the 52 week high. So, at 1360, minimal risk from that forced conversion scenario anyway.

    2. Help me understand how WFC-L works. My read is if the share price of WFC common goes over $203.72 (130% of 156.71) , there’s a forced conversion at the company’s discretion to 6.38 shares of common. With the common now about $23, that seems unlikely in my lifetime. Do I have it right?

      1. For all intents and purposes, its not going to ever be called. If there was a scenario where WFC common could go 1000%, I would be very happy with that scenario too.

  4. Priced at exactly the same YTC as the the Series Z issued earlier this year, which makes sense.

    No money left on the table and won’t be bought by me as a flip unless it trades well under 25.

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