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Hudson City Bancorp, Inc. Message Board

  • JJR1998 JJR1998 Aug 23, 2000 1:19 PM Flag

    Second-Stage

    In a strong market, the exchange rate is usually
    at the upper levels and a pop can be expected at the
    open. Minority shareholders who owned before the
    second-stage announcement did very well. Those who speculated
    and bought the shares above $72, lost money on the
    offering. The depositors who took part in the offering
    enjoyed a 20% pop.

    Valuations are, of course, a
    major consideration and at $12 a share it represented
    152% P/B. It's ironic that depositors usually do
    better in the short run when there is a high exchange
    ratio with the minority shareholders. The reason is
    that the offering is hot, but in the long term,
    depositors get better value from a low exchange ratio. (Not
    unlike buying into thrift IPO's at high P/B ratios and
    doing very well because market is hot. When market
    cools off, P/B ratios are lowered and valuations are
    better but market pops are subdued).

    For short
    term gains, MHC second-stages must take place in a
    strong market. There are too many variables involved in
    the transaction to second-stage in a market such as
    the present one. The next posting will look at the
    worst second-stage to date

 
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