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Under the proposed plan, all existing common stock and preferred shares will be canceled when CIT exits bankruptcy, and existing bondholders will get nearly all of the new common stock.
In order to focus attention on this growing aspect of its business, Quantum plans to replace its existing common stock with two classes of tracking stock so that investors will be able to track the progress of the two business units separately.
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If the bank's prospects for recovery are good and it pays back the government within two years, all of the stock's future gains go to existing common shareholders.
And many of the banks that the government has ordered to raise more capital may do so by swapping existing preferred shares for common stock.
Any fresh injection of government money, or the conversion of its existing preferred shares into common stock, would give taxpayers a much larger — perhaps even a majority stake — in the company.
We have no information yet on whether or not Facebook is continuing to pitch for new money, or if the rumors from last weekend from VentureBeat that says they're close to closing $150 million from existing investors in a common stock sale that would value the company at around $4.5 billion.
Lincoln also said it would sell $500 million in new senior debt and issue $600 million in new common stock, diluting existing shareholders.
Citigroup is also one of only two TARP recipients so desperate for capital that they've swapped government-issued shares into common stock, diluting existing shareholders.
Once the Fed has been fully repaid, the Treasury will convert its preferred shares to common stock, diluting existing shareholders yet again.
The move, which essentially would swap debt for equity, would help relieve the balance sheets of those institutions, although it would also hurt other existing shareholders by diluting their common stock.
Additionally, DST has the option to buy another $100 million worth of common stock from existing employees and investors.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com