WaMu Takes $7 Billion; Who Gets the Upside?

April 9, 2008

Washington Mutual (WaMu, ticker: WM) cut a deal with TPG for a $7 billion capital injection by issuing common stock and preferred convertible stock. In addition, 1st quarter write offs of $3.5 billion contributed to an estimated first quarter loss of $1.1 billion. WaMu also disclosed that it is shutting down its wholesale mortgage origination unit, closing 186 offices and laying off 3,000 employees. Clearly WaMu needed capital, but is this the best option for existing shareholders? What is the upside for shareholders and TPG? How long will WaMu’s troubles last? How will we know the suffering is at an end? Is WaMu destined to be acquired?

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