The bank will survive, but not the shareholder..
WIth the price of the preferreds at about $6, they imply that the probability of failure of FRC (defined as a complete wipeout of the preferreds and common) is about 76%. Hence the probability of success (defined as preferreds regaining their $25 par value) is about 24%. This can be derived by using the expected value function and a few simplifying assumptions in defining the probability of success and the probability of failure as well as the monetary outcomes of success and failure. In reality, these aren't exact probabilities but they seem to me to be in the right order of magnitude. Either the price of the common or the prices of the preferreds are wrong. If the price of the common is "correct" (from an expected value theoretic point of view) clearly the probability of failure that the preferreds is suggesting is too high. At this time, my money is on the preferred prices being right. Time will tell! $First Republic Bank(FRC)$
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