Banking giant Wells Fargo and Company (NYSE:WFC) has sold a large fixed rate preferred stock issue with a reasonable coupon of 5.625%. This is the 11th $25/share preferred stock issue that WFC will have outstanding. This new issue will be 24 million shares, which is a huge issue, but not nearly as large as some of the issues Wells Fargo has sold in the past. Proceeds from this issue will be used for general corporate purposes.
Being a banking company the issue will pay dividends which are qualified for preferential tax treatment, but the dividends will be non-cumulative meaning if the dividends are not declared by the board of directors they will not be paid nor will they accrue, they are gone forever. The issue is low investment grade rated.
This new issue has started trading on the OTC Grey Market and is priced around $25.05/share. For those interested in buying “wholesale” our OTC Grey Market primer is available here and will explain, in a basic way, the ins and outs of purchasing new issues before they are trading on their permanent exchange.
As mentioned above this new issue will be the 11th $25/share preferred issue that Wells Fargo and Company has outstanding. Investors can review all 11 issues on our “swaps” page here. It is always wise to compare a new issue against issues that are already outstanding because the new issue may provide inferior returns compared to some issues already outstanding. Preferred stocks generally trade on very thin volumes and because of this pricing is not always efficient.
We have no interest in this issue as we continue to avoid long dated maturity issues.