NYCB stock crashes on news it’s hunting for cash
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The first rule for any troubled bank looking for new investment is to make sure it has a deal before the news leaks. That's a lesson beleaguered New York Community Bancorp learned the hard way on Wednesday.
Why it matters: A WSJ article posted just before noon said that NYCB was "seeking to raise equity capital in a bid to shore up confidence."
- Instead, the news ended up causing the share price to fall more than 40% in a matter of minutes.
How it works: An infusion of new equity capital — effectively, the bank selling new shares — would improve NYCB's regulatory ratios and, if it was big enough, might even help bring its credit rating back to investment grade.
- At the same time, however, it would dilute existing shareholders.
Where it stands: NYCB's share price had already fallen from $10.44 on Jan. 29 to $3.22 at the close on Tuesday.
- On Wednesday, it was trading at $3.14 before the WSJ article appeared, and then sank as low as $1.76 before it was halted at 12:30 pm.
