JP Morgan Chase 2010 Annual Report Download - page 268

Notes to consolidated financial statements
JPMorgan Chase & Co./2010 Annual Report
268
Dividend and stock repurchase restrictions
Prior to the redemption of the Series K Preferred Stock on June
17, 2009, the Firm was subject to certain restrictions regarding
the declaration of dividends and share repurchases. As a result of
the redemption of the Series K Preferred Stock, JPMorgan Chase
is no longer subject to any of these restrictions.
Note 24 – Common stock
At December 31, 2010 and 2009, JPMorgan Chase was authorized
to issue 9.0 billion shares of common stock with a par value of $1
per share. On June 5, 2009, the Firm issued $5.8 billion, or 163
million new shares, of its common stock at $35.25 per share. On
September 30, 2008, the Firm issued $11.5 billion, or 284 million
new shares, of its common stock at $40.50 per share.
On April 8, 2008, pursuant to the Share Exchange Agreement
dated March 24, 2008, between JPMorgan Chase and Bear
Stearns, 20.7 million newly issued shares of JPMorgan Chase
common stock were issued to Bear Stearns in a transaction that
was exempt from registration under the Securities Act of 1933,
pursuant to Section 4(2) thereof, in exchange for 95.0 million newly
issued shares of Bear Stearns common stock (or 39.5% of Bear
Stearns common stock after giving effect to the issuance). Upon the
consummation of the Bear Stearns merger, on May 30, 2008, the
20.7 million shares of JPMorgan Chase common stock and 95.0
million shares of Bear Stearns common stock were cancelled. For a
further discussion of this transaction, see Note 2 on pages 166–
170 of this Annual Report.
Common shares issued (newly issued or distributed from treasury)
by JPMorgan Chase during the years ended December 31, 2010,
2009 and 2008 were as follows.
Year ended December 31, (in millions)
20
10
2009 2008
Issued – balance at January 1
4,104.9
3,941.6 3,657.7
Newly issued:
Common stock:
Open market issuance
—
163.3 283.9
Bear Stearns Share E
x
change
Agreement — — 20.7
Total newly i
s
sued
—
163.3 304.6
Canceled shares
—
— (20.7 )
Total issued
–
balance at
December 31 4,104.9 4,104.9 3,941.6
Treasury – balance at January 1
(162.9)
(208.8) (290.3 )
Purchase of treasury stock
(77.9)
— —
Share repurchases related to employee
stock-based awards(a) (0.1)
(1.1) (0.5 )
Issued from trea
s
ury:
Net change from the Bear
Stearns
merger as a result of the reissuance of
Treasury stock and the
Share Exchange
Agreement — — 26.5
Employee benefits and
co
m
pensation
plans 45.3 45.7 54.4
Employee stock purchase plans
1.0
1.3 1.1
Total issued from treasury
46.3
47.0 82.0
Total treasury
–
balance at
December 31 (194.6) (162.9) (208.8 )
Outstanding
3,9
10.3
3,942.0 3,732.8
(a) Participants in the Firm’s stock-based incentive plans may have shares
withheld to cover income taxes.
As noted in Note 23 on pages 267–268, pursuant to the U.S.
Treasury’s Capital Purchase Program, the Firm issued to the U.S.
Treasury a Warrant to purchase up to 88,401,697 shares of the
Firm’s common stock, at an exercise price of $42.42 per share,
subject to certain antidilution and other adjustments. The U.S.
Treasury exchanged the Warrant for 88,401,697 warrants, each of
which was a warrant to purchase a share of the Firm’s common
stock at an exercise price of $42.42 per share and, on December
11, 2009, sold the warrants in a secondary public offering for $950
million. The warrants are exercisable, in whole or in part, at any
time and from time to time until October 28, 2018. The Firm did
not purchase any of the warrants sold by the U.S. Treasury.
Under the stock repurchase program authorized by the Firm’s
Board of Directors, the Firm is authorized to repurchase up to $10.0
billion of the Firm’s common stock plus 88 million warrants sold by
the U.S. Treasury in 2009. During 2009, the Firm did not repur-
chase any shares of its common stock or warrants. In the second
quarter of 2010, the Firm resumed common stock repurchases, and
during the year repurchased an aggregate of 78 million shares for
$3.0 billion at an average price per share of $38.49. The Firm’s
share repurchase activities in 2010 were intended to offset share-
count increases resulting from employee stock-based incentive
awards and were consistent with the Firm’s goal of maintaining an
appropriate sharecount. The Firm did not repurchase any of the
warrants during 2010. As of December 31, 2010, $3.2 billion of
authorized repurchase capacity remained with respect to the com-
mon stock, and all of the authorized repurchase capacity remained
with respect to the warrants.
The Firm may, from time to time, enter into written trading plans
under Rule 10b5-1 of the Securities Exchange Act of 1934 to
facilitate the repurchase of common stock and warrants in accor-
dance with the repurchase program. A Rule 10b5-1 repurchase
plan allows the Firm to repurchase its equity during periods when it
would not otherwise be repurchasing common stock – for example
during internal trading “black-out periods.” All purchases under a
Rule 10b5-1 plan must be made according to a predefined plan
established when the Firm is not aware of material nonpublic
information.
As of December 31, 2010, approximately 564 million unissued
shares of common stock were reserved for issuance under various
employee incentive, compensation, option and stock purchase
plans, director compensation plans, and the warrants sold by the
U.S. Treasury as discussed above.