The Treasury Department will make its latest move to regain additional taxpayer money on Thursday as an auction is scheduled to sell the Wells Fargo (NYSE: WFC) warrants it holds. The Treasury is expected to raise at least $715 million from the auction, based on the minimum bid of $6.50 a warrant.
However, it is very likely the auction will raise substantially more as analysts are estimating an average sales price per warrant of at least $9. The Treasury has already conducted auctions for Bank of America (NYSE: BAC) and JP Morgan (NYSE: JPM), which saw strong demand, pushing the sale price well above the minimum bid.
The Treasury is auctioning off 110 million warrants that give buyers the right to purchase shares of Wells Fargo at $34.01 a share up until October 2018.
Investors are inclined to pay-up for warrants on bank names as returns have been in excess of 30 percent on the securities as seen by returns on the Bank of America and JP Morgan warrants.
The Treasury Department auctions off warrants when the issuing bank decides not to repurchase them because the two parties cannot agree on a fair price.
