The Collapse of Wachovia – How a Bank with $38 in Book Value Per Share Became Almost Worthless Overnight

Sitting on my desk in front of me, as I type this article, is an analyst report by Morningstar for Wachovia dated December 31st, 2007.  This is the bank that was built almost entirely on the foundation of R.J. Reynolds Tobacco in Winston-Salem.  At the time, Wachovia common stock had closed at $38.03 and was paying a very rich 6.31% dividend yield.  The analysts at Morningstar valued the shares at $61.00, indicating they were nearly 40% undervalued. Within 10 months, those same shares of Wachovia were trading for $1.00 following a catastrophic collapse.