The Market for Stock Offerings Turns Murky

By Witkowski, Rachel | American Banker, October 5, 2010 | Go to article overview

The Market for Stock Offerings Turns Murky


Witkowski, Rachel, American Banker


Byline: Rachel Witkowski

Raising capital through the stock market has become a dicey prospect for banking companies, with a growing number delaying such offerings while others are pursuing alternate funding routes.

Through September, 45 offerings were terminated in filings with the Securities and Exchange Commission this year, up from 37 offerings called off in the same period in 2009, according to data from SNL Financial LC. Despite improvement in bank stock prices, two factors are fueling this move: a lack of demand to fully subscribe offerings and an inability to hold prices steady.

"There are just a lot of mixed signals out there," said Carter Bundy, an analyst at Stifel Nicolaus & Co. Inc. Bankers and investors realize "this is not going to be a huge trajectory [to economic recovery]. This is going to be a slow grind, and that's going to impact a lot of financial institutions and their ability to raise capital."

As a result of this uncertainty, some publicly traded banking companies are looking to complete their capital-raising efforts in the private placement market. And companies under regulatory orders with little time to raise capital may have no choice but to seek an acquirer.

The capital-raising market is especially difficult for companies with credit issues that must repay their Troubled Asset Relief Program funds, Bundy said. "It's going to be a tough outlook through the end of the year and the beginning of 2011, and likely the rest of that year," he said.

Six of the 45 offerings terminated this year, and 16 of the 37 in 2009, involved publicly held banks redeeming their Tarp funds and consequently terminating their shelf registration filed with the SEC. The pool of terminations included offerings for common stock, preferred stock, trust preferred and debt-related offerings.

Analysts said investors are wary of banks that have not yet redeemed Tarp investments. With these companies, potential investors have a "show-me" attitude before they will get on board with a recapitalization.

"Generally, those have been much more difficult to do in the marketplace, particularly when there is not new leadership coming in," said Mark Muth, a senior research analyst at Howe Barnes Hoefer & Arnett Inc. …

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