The collapse of Wachovia Corp.'s share price will sting for many of the company's Hampton Roads investors, including retirees who have held the stock for years, stockbrokers and financial advisers said Tuesday.
"You don't realize how many shareholders Wachovia has in the region," said one Norfolk broker who spoke on condition of anonymity because he wasn't authorized by his firm to speak with the media. "You have some retirees using the dividend to pay for their basic living expenses."
Shares of Charlotte, N.C.-based Wachovia plunged more than $8 on Monday to close at $1.84 after it agreed to sell its bank subsidiary to Citigroup Inc., the nation's largest bank. Citigroup said it expected to pay about $1 for each of Wachovia's shares. Federal regulators pushed Wachovia to sell the bank because of its mounting losses, especially from troubled mortgages.
Wachovia's stock jumped $1.66 to $3.50 a share on Tuesday amid speculation that its remaining businesses, including the brokerage firm Wachovia Securities, would be sold. Despite that gain, Wachovia's shares are still down more than 90 percent from a 52-week high of $51.80 last Oct. 5.
The stock has been widely held in Hampton Roads because of the many banks that Wachovia and its predecessors acquired in the region, paying with their own stock. Wachovia, the product of a major merger in 2001, holds the leading share of Hampton Roads' bank deposits, almost 22 percent, according to the Federal Deposit Insurance Corp. 's most recent deposit market-share report.
Will Sessoms, Virginia Beach president of TowneBank and a former officer of Wachovia Bank, said Tuesday that he "still owns a few shares, and it hurts."
However, some Wachovia shareholders have held on to the shares because of the hefty capital gains that they would have to pay if they sold, said Rick Mayo, a financial planner in Virginia Beach with the brokerage firm Raymond James.
Employees and former employees probably hold significant amounts of Wachovia stock, including some in their 401(k) retirement plans, Mayo and other brokers said. Wachovia has slightly more than 700 employees in Hampton Roads.
Mayo said a friend who once worked for Wachovia recently increased his holding, confident that the bank would weather its difficulties. Some employees of large companies often load up on their employer's stock, he said, because they wrongly figure, "We can't possibly go out of business. We're too big."
Among the major losers is Robert Steel, the former Treasury Department official and Goldman Sachs executive who took over as Wachovia's chief executive in July. Steel bought 1 million shares for more than $16 million, or $16.24 a share.
Individual shareholders have plenty of company among mutual funds, insurers and other institutional investors. The list of major holders of Wachovia shares reads like a who's who of such companies.
During the April-through-June quarter, the mutual-fund management firm Dodge & Cox in San Francisco raised its holdings in Wachovia to 188.9 million shares, or 8.9 percent of Wachovia's outstanding stock, according to Bloomberg News. Meanwhile, Boston-based Fidelity Investments doubled its holdings to 5.3 percent, or 114.8 million shares, during the same quarter, Bloomberg reported.
The Virginia Retirement System, which manages the pension plans for state agencies and several of Virginia's municipalities, held slightly more than 861,000 shares of Wachovia at the end of June, according to Bloomberg.
As a result of such wide ownership among investment companies, many people who own mutual funds either directly or through retirement accounts may have lost money on Wachovia.
The news that Wachovia will sell its bank prompted speculation among Hampton Roads brokers and planners that the company will change its name in an attempt to distance itself from the bank's problems. A change in the identity of its brokerage firm from Wachovia Securities "has got to be on the table," Mayo said.
Tom Shean, (757) 446-2379, tom.shean@pilotonline.com
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From the Wall Street Journal: Heard on the Street
"When exploring an acquisition of Wachovia this weekend, did Wells Fargo play a high-stakes game of chicken with the government -- and lose? Citigroup, with government assistance, ended up buying Wachovia at a price that was well below its market value Friday. Until midday Sunday, Wells Fargo was prepared to pay a premium for Wachovia, but it backed off in circumstances that left government officials scratching their heads. One viewpoint: Wells Fargo thought wrecking the deal might lead the government to seize Wachovia and, in a replay of the Washington Mutual-J.P. Morgan Chase deal, sell its business to Wells at a fraction of the price."
Was this fire sale necessary? They couldn't wait one week to see if the rescue/bailout passed before hurting the stockholders?
Waah
Waah...that's the breaks of buying stocks. It happens all the time. If you're properly diversified it really isn't an issue when one takes a dump.
Real reason
Wachovia had to be sold not because of mis-management but the "short-sellers" went after it big time last Friday after they destroyed WMU the day before. This destroyed their stock price therefore effectively killing the company. These short traders like their brother futures traders are destroying our economy along with citizens savings and investments.
Nowhere in the so-called bailout or "rescue" bills do I see any action to get these leeches under control and make their trading methods illegal. Nothing will change until we clean out wall street and the money hungry greedy traders.
go after execs?
Why? Because they were stupid? Bad business decisions are not against the law. Boards pay execs even when they fail - you and I, on the other hand, wouldn't expect a bonus for bankrupting our company. What's funny is that some other company will hire the out-of-work execs expecting a different result.
Businesses should be allowed to fail or succeed on their own - regardless of size.
Go after the execs!
Go after the execs! A year or two ago when Wachovia bought Golden West and their huge dumptruck load of really bad loans, I saw discussion that Wachovia would fail because of this very very bad decision. If a bunch of random housing bubble bloggers were able to call this, how could their executives not? And let me tell you, these people were not calling doom and gloom on everyone. Just a few banks, such as Wachovia and Washington Mutual. I wouldn't be surprised if the execs got huge bonuses for the short term gains before it killed the bank. That is the problem with the stock market and American corporations -- they are so focused on short term that they are willing to set us up for fall. And I don't dare short stocks like Wachovia because you can't tell if the gov't is going to jump in and interfere (like blocking the ability to short financials).
Wachovia Tower
It is still going on as planned because it has been fully funded and the lease is already in order. However, it will be called the Citigroup Tower instead.
That's Life
Stocks drop, and they go back up. It's life.
focus on bond and buy stocks when people are panic.
If you see stocks can drop more than 30%, you should know you have wasted about 5 years of your investment. Active adjustment should be part of long term investments because we will experience a slowdown every 5 to 10 years, which means loss of about 20% stock values in average. In fact, individual stock can go back and forth many times in one year. Is that really better than bond investment? You will also enjoy better sleep with bond investment.
If you focus on bond investment, you will also have opportunity to get very very cheap stocks. My suggestion is to focus on bond and buy stocks when people are panic. I know that stock brokers do not like my strategy but this will avoid many sad stories. I am strongly against stock mutual funds because passively managed mutual funds means that you will get both good and bad stocks and your gain will be very much limited; on the other hand actively managed fund
another one bites the dust...
So...what will become of the new Wachovia tower? Will it be completed or is it destined to become another "Granby Tower"; just another eyesore in Norfolk?