This board has been pretty quite, particularly since i) SIVB has proven to be a pretty solid company and ii) if you bought ~18, a great investment.
So I wanted to stir up the pot a bit. Something is clearly up here.
We have the $135 million convertible offering which passed without mention. An excerpt: "... The notes will not bear interest, will be convertible into the company's common stock at an initial conversion price of $33.6277 per share and will be subordinated to all present and future senior debt of the company. Holders of the notes may convert their notes only if: (i) the price of the company's common stock issuable upon conversion of a note reaches a specified threshold, (ii) specified corporate transactions occur or (iii) the trading price for the notes falls below certain thresholds. The sale of the notes to the initial purchaser is expected to close on May 20, 2003. ..."
Item iii) makes me think "toxic convertible". However, in aggregate, I don't understand this investment instrument or why SIVB is doing it.
The second item of interest: SIVB announced that they had $34.3 million shares outstanding. Among other things, this means they've bought 4 million in buyback.
So, why the PR? That had to be the oddest release I've seen out of a company in some time.
As for the $135MM convertible, SIVB gets interest free capital and the stock price at the time of issuance was $8 to $10 per share lower than the convertible price. I suppose SIVB issued the notes to raise money at low cost. If they are buying common shares back in the low $20s or high teens, and the convertible exercise price is $33+, they could make money right there if the $135MM was used in whole or in part to pay back loans for the accelerated common buyback.
The outstanding share balance press release probably was issued to clear up how many shares are outstanding after the share buyback program, which was advanced beyond what the Company had intended to buy in given periods. I posted several times about the stock buyback program, and even with my Finance major I had a hard time figuring out how the stock buyback was being administered or what contingencies might affect the outstanding share balance.
I agree the press release was odd. The 2002 Annual Report shows basic EPS at $1.21, $1.85 and $3.41 for 2002, 2001 and 2000. Diluted EPS as reported for the same years was $1.18, $1.79 and $3.23, so the rate of dilution is coming down. Again according to the 2002 Annual Report, the number of common shares outstanding as of December 31, 2000 was 48,977,906, as of same date 2001 was 45,390,007, and as of same date 2002 was 40,578,093.
The 2002 Annual Report refers to the Proxy Statement for the 5% owners. Since I didn't keep anything but the comparative stock price performance from the 2002 Proxy Statement only Yahoo would be a source for me for the 5% owners. The 2001 Annual Report showed FMR Corp. [Fidelity mutual funds' affiliate] owned 9.984% of the outstanding shares, Franklin Resources' entities owned 9.6% of the outstanding shares, The TCW Group [a Trust Company of the West affiliate] owned 5.3% of the outstanding shares, and H.A. Schupf & Co., LLC [investment advisers] owned 5.1% of the shares. It would be interesting to see what the ownership is now, although the Yahoo profile for the Company probably has the 5% owners as of 12-31-02. The Note to the 2001 Annual Report indicate the 5% owners data was as of February 14, 2002 as shown in the 13G filing with the SEC of those respective owners. Someone with Edgar expertise could probably access the 13G data for 2003.