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.