Silicon Valley Stock Issue Draws Criticism of Bank's Ex-Underwriter

By Zuckerman, Sam | American Banker, June 19, 1991 | Go to article overview

Silicon Valley Stock Issue Draws Criticism of Bank's Ex-Underwriter


Zuckerman, Sam, American Banker


Silicon Valley Stock Issue Draws Criticism of Bank's Ex-Underwriter

SAN FRANCISCO -- In an unusual turn of events, Silicon Valley Bancshares' impending stock offer is being criticized by the investment bank that managed its first stock offer three years ago.

The investment bank, Hoefer & Arnett, is quietly telling clients it has concerns about Silicon's latest 1.2 million-share issue, which is expected to raise some $15 million.

The San Francisco-based investment firm questions the timing of the offering because of Silicon's heightened exposure to the depressed Northern California real estate market. Silicon Valley's real estate construction portfolio rose almost 70% last year.

But sources close to the deal maintain there is an element of sour grapes behind Hoefer & Arnett's actions. The sources said the investment firm is piqued that Silicon Valley chose the much larger Oppenheimer & Co. to manage its lastest stock issue.

Hoefer & Arnett "wanted into the deal as late as two weeks ago," said one source.

A Hoefer official said the firm was invited to join the sales syndicate for Silicon's latest offering, but declined for "business reasons." He would not elaborate. Spokesmen for Silicon and Oppenheimer declined to comment.

One organization that talked with Hoefer was T. Rowe Price Investment Services Inc. the Baltimore mutual fund group. In a telephone conversation, a Hoefer represntative "raised five or six issues, all negative" about Silicon's offering, a Price employee said.

Silicon's stock, adjusted for splits, has more than tripled since it was offered at $3.86 a share three years ago. The company stock was trading at $12.50 a share late Tuesday, suggesting the offering would raise about $15 million.

Is Wall St. Receptive?

Silicon's offering, the first by an independent bank this year, is regarded as a bellwether of Wall Street's receptiveness to stock issues by smaller banks in the state.

The company, with $776 million in assets, has headquarters in Santa Clara near San Jose and is one of the Golden State's fastest-growing and best-performing independent business banks. …

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