Mar 7, 2024 - Economy

How Steve Mnuchin-led investment caused NYCB's valuation to rise $2 billion

Illustration of a hand operating a marionette attached to a stock trend line

Illustration: Annelise Capossela/Axios

Here's some impressive financial arithmetic: By injecting $1 billion of new capital into the beleaguered New York Community Bancorp, an investor group led by Steve Mnuchin caused the bank's valuation to rise by more than $2 billion.

The big picture: At the close of trade on Tuesday, NYCB had 722 million shares outstanding, which meant that at a price of $3.22 per share, it was worth $2.3 billion.

  • On Wednesday, the Mnuchin-led deal was announced. His consortium is investing $1.05 billion at $2 per share, implying a purchase of 525 million shares. As a result, the total number of shares outstanding will rise to 1.247 billion. (There are also warrants, but let's ignore those for the time being.)
  • When the stock closed on Wednesday at $3.47 per share, that looked like a relatively small rise in the stock price of just under 8%. In market cap terms, however, it was much bigger.

By the numbers: With 1.247 billion shares outstanding, a share price of $3.47 means a market cap of $4.3 billion — a rise of $2 billion from the closing level on Tuesday.

Between the lines: In reality, the rise in market cap is greater still, thanks to those warrants, which are highly likely to be exercised at $2.50 per share.

  • When that happens, the share count will rise by another 315 million. That'll mean another $1.1 billion of market cap, assuming the shares don't rise at all from their Wednesday closing level.

Reality check: NYCB has a book value of $10.3 billion — or $11.3 billion, after the new checks have cleared — which means that its new $4.3 billion valuation is not particularly impressive.

  • All the same, significant value was created on Wednesday.
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