84% of my Wells Fargo 6% preferred Series T (WFCPRT or WFC-T) is being called.
Odd thing is it looks like I'll get $25 plus another quarterly divvie of 38c for Dec 16 to Mar 16... but it was trading on Friday at $25.56-$25.69.... how is that?
Why would anyone bid more than $25.38 knowing that it will be called in a month?
Am I missing something or are investors really that stupid?
Looking to get the wisdom of the group on a problem that I am having with Fidelity regarding this partial call.
This is my first partial call. I have had full calls in the past and in some cases the market price was close enough to what I would receive if I waited for the call that I sold the issue and reinvested the proceeds rather than waiting for the call.
Sometime after the announcement on February 14, Fidelity bifurcated my 500 share position into an 80 share lot and a 420 share lot. I sold the 80 share lot this morning for $25.68 (more than the $25.36 that I would receive on Mar 16) and when I went to sell the 420 share lot it would not let me do so, so I called Fidelity.
Fidelity says that this is how all partial calls work, that Wells effectively called 420 of my 500 shares and they are frozen until the call date. I respond that the effective date of the call is March 16, so any holders of this ticker on March 16 knows that 84% of their shares will be called, but that I don't see how Wells and Fidelity can lock up my shares before the call date based solely on the announcement of the call. Does this make sense to any of you? For any holders of WFCPRT or WFC-T with brokers other than Fidelity, are you also prevented from selling 84% of your shares held as of February 14?
February 12, 2020 -- Wells Fargo & Company today announced that on March 16, 2020, it will redeem 26,720 shares of its Non-Cumulative Perpetual Class A Preferred Stock, Series T.
I asked the Fidelity supervisor why I can sell in the event of a full call but not in the event of a partial call... in each case the market know that if they hold these shares on March 16 that a cartain percentage of them will be called for $25 plus the 37.5c divvie... so in each case marketplace participants have all the information that they need to make an informed decision on the value of the shares. The only thing he could say is that they just work differently. He said that if I sold the shares when March 16 comes along that my account would be short 420 shares.*
However, if this practice of locking up shares to be called is standard practice as Fidelity indicates, then I think I can now answer my question from the earlier.... what I was missing was that the shares now trading are only the shares that will survive the call so their valuation is based on more than just the call proceeds.
Thoughts?
P.S. Luckily, the amounts involved are not significant, in fact, arguably negligible, but I am still interested in the answer.
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*at the time I didn't think to ask what would happen if my account was 420 shares short.... depending on the consequences I might have been ok with it.
