Common shareholders face Bank of America cash infusion

Bank of America (BAC) may be losing its fight over the "stress tests" results. According to the Financial Times, "Citigroup and Bank of America are working on plans to raise more than $10 billion each in fresh capital." A number of analysts expected that Citi would have to raise money. The situation at B of A was not quite as clear.

Bank of America will do whatever it can to get the money from private investment sources to avoid having the government get a greater say in the company's operations. With credit markets thawing a bit, the bank may be able to pull that off, but will almost certainly have to offer shares below the current market to cut any investor's risk.

Current equity investors in the bank will probably bear the brunt of the dilution created by the new capital, even if the money comes in as preferred that can be converted to common stock at a later date. Bank of America's market cap is $56 billion and its stock price is below $9. A new investor might get shares at $7 or below.

B of A stockholders are about to get dinged again.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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