Colorado Stark

Flagstar Bancorp, Inc. (NYSE:FBC) Shares Get Crushed

by Colorado Stark March 28, 2010

Shareholders of Flagstar Bancorp, Inc. (NYSE:FBC, FBC message board) were dealt a near knockout puch on Friday when shares came crashing down to break through a new 52 week low.

The huge drop has put even their TARP warrants underwater.  Last January, Flagstar sold the federal governement 266 million dollars worth of a convertible preferred.  The Series C preferred stock came with a warrant to purchase 64.5 million shares at $0.62. 

At the time that looked like a good strike price, but now that floor has been smashed through.   The company just sold a majorly dilutive block of stock at $0.55.  The company had not previously announced what the pricing of the deal would be.   Clearly this was a shocker to the market.

Prior to the offering, Flagstar had 892 million shares outstanding.  There latest tragic offering will shoot this number closer to 1.4 billion shares creating a tremendous ammount of dilution. 

This offering will provide some capital for the company.   But if they continue to consume cash at the rate they have been burning through money for the last few years, it may not last them long at all.

Flagstar operates banks that offer consumer and commercial products in places like Michigan, Indiana, and Georgia.  The company has been losing money since 2007. 

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