Nov. 7 (Bloomberg) -- Wells Fargo & Co., the biggest bank on the U.S. West Coast, raised $11 billion in a stock sale to help pay for its purchase of Wachovia Corp. and signaled banks may be able to tap the public markets for cash.

``It shows the capital markets have started to open up,'' said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``It will probably send a positive message to the market they were able to successfully raise capital on a tough day.''

Wells Fargo sold 407.5 million shares for $27 each yesterday, 6.2 percent below the Nov. 6 price of $28.77, the San Francisco-based company said. The bank, which planned to raise $10 billion, may sell another 61 million shares depending on demand. The sale was completed as the Standard & Poor's 500 Index dropped 5 percent and the Dow Jones Industrial Average fell 4.9 percent.

The U.S. Treasury bought $25 billion of Wells Fargo's preferred shares in October as part of its rescue of the banking industry. Wells Fargo is expanding its deposit base to the East Coast and creating the biggest U.S. bank by branches with its purchase of Charlotte, North Carolina-based Wachovia.

Wells Fargo fell 7 percent to $26.77 in early trading today. It's the 17th bank to sell shares this year as financial firms have been hampered by the credit crisis. First Commonwealth Financial Corp., an Indiana, Pennsylvania-based lender, raised $100 million on Oct. 31.

Stock Sales

Banks have pulled in $53.6 billion from selling shares this year, according to data compiled by Bloomberg. New York-based JPMorgan Chase & Co.'s $11.5 billion offering in September was the biggest. Bank of America Corp. of Charlotte, North Carolina, raised $10 billion this month. Wachovia, which raised $4 billion in April, was the first bank to sell equity this year.

So far, there have been 224 additional stock sales worth $133.7 billion in the U.S., Bloomberg data show. JPMorgan has helped to arrange $24 billion of those to capture an 18 percent share of the market.

Wells Fargo Chairman Richard Kovacevich said last month the company would raise money, in addition to the government's investment, because adding Wachovia would double the size of the bank. JPMorgan led the Wells Fargo stock sale with assistance from Goldman Sachs Group Inc., Morgan Stanley, UBS AG and Wachovia.

Friedman Billings Ramsey & Co. cut its price target for Wells Fargo to $20 from $25, saying the lender may need to raise more than the $11 billion in fresh capital. Analyst Paul Miller rates the shares at ``underperform.''

Wells Fargo fell 9 percent to $28.77 in New York Stock Exchange composite trading yesterday. The stock has dropped 4.7 percent this year through yesterday.

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net

Last Updated: November 7, 2008 08:37 EST