Three weeks ago the U.S. Treasury Department auctioned off the Bank of America (NYSE: BAC) warrants it had received when providing the company with bailout money from TARP. The auctioned raised more than a $1 billion for taxpayers, while also providing investors with a solid investment opportunity.
The Bank of America Group B warrants were auctioned off by the Treasury a few weeks back for $2.55 a piece, those same warrants closed trading yesterday at $3.40 a piece, marking a 33 percent gain. The Group A warrants on the bank have provided a nice return thus far as well, selling for $8.35 per warrant and closing trade yesterday at $9.53 per warrant.
Auctioning off warrants that are not re-purchased by the issuing bank is one of many ways the Treasury has worked to regain taxpayers’ money from TARP. Bank of America warrants raised $1.57 billion for taxpayers, the largest amount of any warrant auctions performed thus far.
The JP Morgan Chase (NYSE: JPM) warrant auction was the previous record holder, regaining roughly $900 million of taxpayers’ money. That auction occurred on December 10, 2009, with the warrants being sold for $10.75 a piece, then rising 24 percent in the three weeks following the auction.
The U.S. Treasury received warrants and preferred shares from banks in return for financial aid supplied through TARP. Institutions that repaid TARP funds also had the options to re-purchase the warrants, if they could come to an agreed price with the Treasury. Those banks that could not agree on a price, such as Bank of America, JP Morgan, Capital One, etc. saw the warrants to off to auction as an alternative for the Treasury to recoup taxpayer money.