Citizens Republic stock value could plummet after this week's stock offering, broker says by Melissa Burden | The Flint Journal Tuesday June 10, 2008, 8:10 AM FLINT, Michigan -- Shareholders of Citizens Republic Bancorp Inc. will see the value of their stock weaken by 66 percent -- something already happening with a dropping stock price -- after a $200-million stock offering was announced this week, a stockbroker said.
Flint-based Citizens Republic, the largest bank-holding company in Michigan, said Thursday it is trying to raise $200 million through new offerings of preferred stock, a higher-ranking stock that pays a specific dividend, and common stock, which gives shareholders equity ownership in a company and sometimes pays a dividend.
In a news release, the company said the money raised will give it capital to enhance its balance sheet, as well as deliver "long-term shareholder value as current economic and credit conditions improve."
On Friday, Citizens Republic released the number of shares it hopes to sell and prices for the shares.
R.J. Kelly, senior vice president for investments at Raymond James & Associates in Flint Township, said the offerings, if successfully sold, could increase the number of shares outstanding from about 75 million today to as many as 125 million.
That increase will dilute things such as earnings per share and any dividend, for current shareholders by about 66 percent, Kelly said. The effects also have been felt through drops in the stock price, down 25 percent since Thursday's announcement.
The company will ask current shareholders to approve converting the preferred shares into common stock. If approved, shareholders will receive , receiving 12.5 shares of common stock for each share of preferred stock.
A company filing with the U.S. Securities and Exchange CommissionSEC on Friday said that if the preferred stock hasn't been converted into common stock by Oct. 9, special dividends beginning at 15 percent annually would be paid quarterly for those holding preferred stock.
Kelly said the special dividend is "extraordinarily high" and will persuade shareholders to approve the measure, further diluting their shares.
"That's a very, very expensive borrowing, which will kind of put pressure on the existing shareholders to approve these new shares," he said.
Bank officials are not able to comment on the public stock offering because of an SEC rule.
Bob Piper, president of Piper Realty in Mundy Township, said the stock offering and dropping stock price aren't good news for longtime shareholders like himself, but he plans to hold onto his shares for now.
"The question is not: 'Iis Citizens Bank going to come back?' (The question is,) 'Is Michigan going to come back?,'" he said. "Michigan is a huge part of Citizens market. Until Michigan turns around, no Michigan bank is doing well."
Citizens Republic, the 41st largest bank-holding company in the U.S., has 239 offices in Michigan, Ohio, Wisconsin and Indiana as Citizens Bank and F&M Bank in Iowa.
see i find this hilarious. Strong sell at $3.85 per share? This is a buy - at a minimum hold. To sell right now would be insane. There was a massive correction in the banking sector, and its finally really hitting home. Things will calm down within the next year and this stock will be back on the upswing.
I'm not saying this is a place for someone with a weak stomach. But it can't go much lower than this, and if you have more than a year in your investment timeframe selling now would be a terrible move.