This stock should have moved up from $40 to $45 instead of moving down from $40 to $36 upon the announcement of tier 2 in mid December. I for one expected that the stock would move up whenever the announcement came, and I think most longs expected that too. So far I am proven wrong. But there is still time between now and the 2nd Qtr when the stock offering is scheduled. The stock could move up. In fact there was at least one upgrade within the last day or two/
The size of the conversion stock offering is big. For this reason, it seems that there is a concern that conversion may not go as well as it might if the bank was smaller in size and fewer shares were to be offered and fewer dollars were to be raised. It is a legitimate concern. But there is enough money in the market to buy quality issues � look at Google and the like. I think that this bank and its management have built a very solid reputation and the stock will easily find acceptance at the time of offering.
My personal feeling is that it will go at the max. If it does so, current stockholders will get a very good split ratio. So they can stand to gain not only because of the enhanced split ratio but also from a marginal pop in the price of, say 10-20 percent. Not bad! In a not-so-rosy acceptance of the stock at the time of 2nd tier offering, assuming the offering is consummated at the min level. The resultant split ratio for the current stockholders will be less, so that they will get fewer shares in exchange. But the pop in price will be better, say 20-50 percent (am I crazy or what?). Basically, what I am saying is that current longs have nothing to lose � just hold and enjoy the ride.
What is a little dicier is to decide how much more to buy, if you have sufficient qualifying balance. I do and I could go for the max. My concern is that if the offering goes for the max, the resultant pop will be relatively less.
Will this offering go for the min or the max or somewhere in between? There is no way to tell. But I will hazard a guess. What the heck? I have been wrong before. One more time, it can happen and I will have to live with it. I venture to guess that this subscription offering will be subscribed to the max.
I see what you guys are saying: that the first line of defense is the min/max range so if people see a negative arbitrage developing between the ratio versus the trading price of the listed stock, they will be disuaded from buying it therefore the offering will tilt towards the minimum based on the $$$ that comes in. However, if the relationship gets really negative, I just can't see anyone buying secondary stock. I think the examples thriftman cited on cap fed etc were not second stage, there was no public stock to evaluate or else they must of traded down after the offering but been about evenish just before???
I'm not sure if this answers your question, but the tricky thing about exchange ratios is that they exist so that, regardless of the amount of stock sold in the second step (max, super max, et seq) the minority holders will, in the aggregate, own the same % of the bank as they did before the transaction. After all, the only thing being sold is the MHC's ownership interest in the bank. The minority holders are simply participating in an exchange transaction. This is why appraisal is key to your question. However, if the market is so bad that the bank cannot sell even the minimum number of shares in the appraisal range, even after flacking it in the community--and this is still a huge amount of shares in the case of HCBK--then sure the deal will be pulled and re-priced.
That sucking noise you hear is the 5 billion being sucked out of the recent ipos and the 32 new ipos in the pipe line.....people will line up to buy hudson city at 1.3 times book which is what the $ 10.00 issue price will represent. Why own any of the other small thrifts that have no liquity and trade way over 1.3 times book.? All the thrifts are under
pressure and will stay that way until hudson
city ipo is over.
Hudson city will issue 5 billion dollars of new stock at the super-max....the conversion
rate will be set after the issue has closed and it is determined by the amount of interest in the second stock offering. The conversion rate
range is 3.1 on the low and 4. On the high and if you buy stock now you may be under water . When he conversion rate is announced. The current selling price of the stock has nothing to do with what the conversion ratio will be. If the issue is only sold at the minium a 3.1 ratio is the conversion figure and if the issue
goes to the supermax a 4. Ratio is the figure. Buying stock now is really rolling the dice. Hope this helps make your decision.
How can you dilute when you spend money to make more money ,after the conversion this bank will have more than six billion dollars in cash ,they will use it as they see fit ,if what you say was true all investments will cease.Stock exchanges will close their doors ,and people will hide their money under their beds.
"That's their goal -- not to make money for investors from Day 1." Keep something in mind, most of these folks at this bank own thousands and thousands of shares, they are big investors. I would think that they would also love to see this baby go as high as possible as we would to cash in.
Then the stock opens at $8 1/2 and you're out of luck.
The OTS and bank want to raise as much $$$ as possible. That's their goal -- not to make money for investors from Day 1.
CFFN traded down to $8 1/2 in 1999. Nobody got a do-over.
It's all in the prospectus...BUYING BANK STOCKS IS RISKY...IF THE PRICE OF PUBLICLY TRADED BANKS GOES DOWN DURING THE OFFERING, THEN THE STOCK MAY OPEN DOWN TOO.
When bank stocks went down for 2 straight years in 1999 and 2000 then they had nowhere to gobut up. But after 4 years of a rise, they may have nowhere to go but down.
It has been a nice ride with this bank,and when we add between 4 to 5 billions to it ,the ride will improve,because management can buy any different entity and improve it ,cause we have the best run bank in the country.