When Florida First Bancorp stock began trading publicly last Wednesday, the thrift company's executives gathered at Nasdaq's Washington headquarters to root for a big first-day gain.
But investors showed little interest in the Lakeland-based company and the stock came out of the gates more than $1 below its $10 offering price. By day's end, the price had fallen to $7.875-among the worst first-day drops for a newly public thrift company in this decade.
"It's uncomfortable sitting there with your client, watching the stock go down," said Samuel J. Malizia, a Washington attorney who represented $415 million-asset Florida First in its conversion from a mutual thrift. "You'd like to see a modest 10% 'pop.'"
Other thrifts that have gone public in 1999 feel Florida First's pain. A favorite of institutional investors just a year ago, thrift stocks are suddenly less fashionable than skinny ties.
In the first quarter the average first-day gain-or "pop"-for 11 new thrift stocks was a mere 6.4%, according to SNL Securities LP. That's a far cry from a year earlier, when thrift stocks averaged a 53.3% gain on the first day of trading.
"This is as bad as it's been since 1990," said Martin Friedman, director of research at Friedman, Billings, Ramsey & Co. in Arlington, Va.
Some industry analysts said thrift stock offerings are getting a cool reception mainly because investors prefer to put their money in sexier technology stocks.
"There is no one on the other side of the table to buy these thrifts," said David Harvey, fund manager of Everest Partners LP in Gardnerville, Nev.
Others say appraisers are valuing the deals too high in order to comply with bank regulators' guidelines.
Whatever the reasons, executives at the converting thrifts are clearly disappointed.
Capitol Federal Financial, a $5.4 billion-asset thrift company in Topeka, Kan., saw its shares drop 2.81% on its first day of trading April 1. At midday Friday the stock was trading at $9.1875, still below its $10 offering price.
First Bancorp of Indiana, a $112 million-asset thrift company in Evansville, also stumbled out of the blocks. Its shares closed down 8.12% at $9.188 on April 7, its first day on the market.
Both John C. Dicus, chairman and chief executive at Capitol Federal, and Harold Duncan, president and chief executive officer of First Bancorp's subsidiary, First Federal Savings Bank, said they were warned that their stocks would fall initially.
"We had seen what had happened in other public offerings in the past 30 days," Mr. Duncan said. Still, he had hoped First Federal would be the exception.
Some bank observers say appraisers may be to blame for the poor pops.
Mr. Malizia contends that appraisers are valuing the deals too high, so thrift companies are issuing more shares than the market can absorb at the offering price, which is typically $10.
"The appraisers have not caught up with the market," said Mr. Malizia, a partner at Malizia, Spidi, Sloane & Fisch.
Mr. Malizia said the appraisers' hands are often tied, however, by stock offering guidelines issued by regulators. The Office of Thrift Supervision and the Federal Deposit Insurance Corp. want appraisers to value the thrifts at levels high enough to avoid pops above 20%.
Higher pops would indicate that the thrift might have been undervalued to begin with, said Richard Riccobono, deputy director at the OTS.
An appraiser, who asked not to be identified, also defended the current system. He said the valuations cannot keep up with the latest market trends because they are based on financial statements and market conditions six months before a thrift's public offering.
"This is not a case of arbitrary and capricious regulators pushing the appraisals up," he said. "If the market is going down, it takes a while before the appraisals reflect that."
Perhaps the biggest losers are professional depositors. Since depositors often get first crack at stock when a thrift converts, these professional depositors open accounts in thrifts nationwide so they can buy shares before the stock goes public. Then the professional depositors-called "flippers"-sell their shares on the first day of market trading.
Still, depositors who plan to hold the thrift shares for years will likely be rewarded, analysts said.
"At some point there are going to be gains," said Jason E. Werner, thrift analyst at Tucker Anthony in Chicago. "It's all about timing."
