B of A May Swap Common Shares

Exchanging Platinum for Silver

Earlier today, Bank of America (BAC) announced that it may swap 200 million common shares for existing preferred stock, which is expected to total more than $2.0 billion of the company's $33.9 billion capital shortfall following the governments "stress test" on the institution. This announcement follows yesterday's announcement that the institution raised nearly $26.0 billion of equity capital in May (to include $5.9 billion from another common shares for preferred stock swap).

As the Federal Reserve has limited the extent to which capital holes can be filled through increased revenue, Bank of America may use only approximately $1.7 billion of expected excess revenue for this purpose. In addition, BAC stated that it might issue nearly 565 million shares from similar swaps or about a 10% dilution to the current share basis. The exchange offer is set to expire on June 24, 2009.

As an interesting side note, BAC's CEO Kenneth Lewis is purported to plan to swap some or all of his 86,000 preferred shares.

Bank of America said it had about 7.92 billion common shares outstanding as of May 26, including roughly 1.5 billion issued this month.

The bank declined to comment on the report, or on Lewis' plans to swap his preferred shares.

Bank of America said its exchange offer expires on June 24, 2009.

Read the full analyst report on BAC