What will Wachovia do?
Banks in trouble need to raise money to get out of the jam. First they try to sell more shares of the company. If that fails, they unload assets or business units. Banks that really get desperate will sell anything that isn't nailed to the floor.
A number of banks facing serious problems are said to be considering sales of their money management arms. But most, like Fifth Third Bancorp., KeyCorp, and National City Corp., own relatively small and undistinguished investment arms.
Not so at Wachovia Corp. The troubled banking giant owns Evergreen Investments, the well-known Boston firm that manages $246 billion in mutual funds and other accounts. Wachovia also owns a big retail brokerage operation. Could they be on the block?
This became a serious question last week, when Wachovia reported the worst loss in company history. New chief Bob Steel told analysts he would sell noncore assets to plug the hole. Steel never did say what he considered a core asset, but promised a review would be finished in months.
Wachovia needs to raise some serious money. Even the company estimates it won't be able to collect on about $9 billion worth of adjustable rate mortgages it owns. The brokerage and Evergreen combined might fetch $10 billion to $15 billion, by one estimate.
A Wachovia official told Bloomberg News that the brokerage was off the table. So what about Evergreen?
An Evergreen official declined to comment, but pointed me to Steel's words during his conference call with analysts last week. Sure, he was prepared to chop off and sell noncore assets. But Steel also said: "We're strong and well positioned in so many parts of asset management, it just seems like a great business for us to continue to drive and grow."
I'd call that inconclusive. But the answer will be clear within a few months.
Here's the good news from GT Solar Corp.: The company's stock fell only a fraction of a dollar yesterday.
The Merrimack, N.H., maker of equipment for solar power manufacturers has endured a star-crossed initial public stock offering that got off on the wrong foot last week and kept stumbling.
GT Solar was no shoestring IPO. The company made $36 million on sales of $244 million in its last fiscal year. GT Solar didn't need money, choosing to go public only so private investors who bankrolled the company could cash out some of their investment. All $500 million raised in the IPO went to them.
Even in a weak stock market, a fast-growing company making equipment with 25 percent profit margins seemed attractive. Then MEMC Electronic Materials Inc., a big maker of silicon wafers, reported financial results that badly missed forecasts. That was after the stock market closed but just as underwriters were pricing the GT Solar IPO late Wednesday.
The GT Solar deal was priced at $16.50 per share, smack in the middle of estimates, and then the shares fell hard the next morning before finishing their first public day at $14.59.
More bad news surfaced Friday, when one of GT Solar's biggest customers said it would buy equipment from a Chinese competitor. The customer, LDK Solar Co., accounted for 62 percent of revenues last year, though GT Solar said LDK orders represent less than 20 percent of its current backlog. GT Solar shares plunged as low as $9.30 on Friday before closing at $12.59.
No news was good news yesterday, though GT Solar slipped another 65 cents to $11.94. The decline of nearly 38 percent from last week's IPO price cut the company's stock market value at $1.2 billion.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com.
