Do you think Washington Mutual will close?

Question

I have thought about investing in Washington Mutual because their stocks are so cheap right now, but what happens if they sell. Do the stocks become 0$?

Answer 1

Look, at the horse track, do you bet on the horses that are in the gate pointed in the wrong direction?  Of course not.  And in stocks, you should not follow losers down the toilet just because they are cheap.  There is a reason the stock is going down.  You don't have to know it or understand it, just know that the stock is going down and down is the wrong direction to follow.  WaMu's account holders are guaranteed by FDIC, but their shareholders have no parachute at all.

Answer 2

More likely they will be taken over by another bank.  No impact to depositors but uncertain for stockholders.

Answer 3

Yes. Been advocating short WM since last fall 2007 (see posts).

I think the FDIC will take then over and the stock will eventually hit zero.

In a buy out, the stock could rally, but no one has surfaced at these historically low prices. I think  they debt is way too big, there will need to raise a lot more capital over the next 3 months, and who is going to lend to them?

They have assets, but they are in such a world of hurt right now, being in the wrong business (mortgage lending) at the wrong time and heavily focused in the wrong location (CA).

If you want to speculate, and go long the risk is current price to zero.

Answer 4

of course not a larger bank will be willing to buy their debt  I think they have raised enough money to be independent for at least 9 more months then look for a buy out

Answer 5

depends on how much the buyer is willing to pay.

sometimes you can make a giant profit if bidder is paying more.

if someone step in and buy the entire wamu for $10/share, you will immediately gain 250-300%

Answer 6

If who sells?  If the company is sold to another bank?  The shares you want to buy ARE the company.  If the company is 'sold' that means someone offers to buy all the shares (including yours), so you get what they offer (if you choose to sell).  Unless they purchase all outstanding shares and want to take the company private, they can't force you to sell.

You should not be buying a share because it is 'cheap'.  You should be buying because you like the prospects and think the stock will rise (and/or pay good dividends).  Cheap can be a sign of too many shares out there, rather than necessarily how valuable the company as a whole is.

As far as I know WAMU isn't in any great financial danger.