Analysts are questioning BankAtlantic Bancorp Inc.'s planned initial public offering for the brokerage unit Ryan Beck & Co. Inc. after an IPO for a similar firm fell short of Wall Street expectations this week.
On Wednesday, Cowen Group Inc., a New York investment banking and brokerage firm owned by Societe Generale AG, priced 11.2 million shares at $16 each - below an anticipated range of $19 to $21. On Thursday, their first trading day, the shares fell 5% in the morning but recovered to close down 0.7%.
Albert Savastano, an analyst at Janney Montgomery Scott LLC, wrote in a note issued Thursday that Cowen's lower price, combined with a difficult market for brokerage stocks, implies "a drop in valuation for Ryan Beck" when it completes its own IPO.
The $6.4 billion-asset BankAtlantic of Fort Lauderdale, Fla., said in April that it had filed a registration statement with the Securities and Exchange Commission. The proceeds were valued at approximately $100 million and were to be used to create a special dividend for BankAtlantic shareholders, as well as to support continued growth and expansion.
BankAtlantic also said that it was considering "other nonpublic financial alternatives," for Ryan Beck, though it expected to maintain a "substantial" interest in the Florham Park, N.J., brokerage.
Mr. Savastano initially estimated Ryan Beck's value at between $275 million and $300 million. After seeing Cowen's IPO, he lowered his estimate to $200 million to $225 million, he said in an interview.
Poor earnings over the last three quarters make it tougher for Ryan Beck to raise sufficient capital, he said. For the first quarter it recorded a loss of $1.6 million, compared with a profit of $2.5 million a year earlier, on weak revenue growth and higher expenses. BankAtlantic is schedule to issue its second-quarter report next week.
Mr. Savastano is not expecting positive second-quarter results from Ryan Beck. "The visibility from the revenue side is very unclear, and the visibility from the expense side is unclear," he said.
Robert Patten, a senior banking analyst at Regions Financial Corp.'s Morgan Keegan & Co., agreed that Ryan Beck's volatile earnings stream, combined with poor market conditions, make it difficult to predict the firm's value and when it will go public.
"BankAtlantic may want to rethink the timing of it," Mr. Patten said. "And I wouldn't necessarily hold that against them."
Some observers say that BankAtlantic might be better served selling Ryan Beck, and that the parent company could be considering a sale.
"Based on the language" in the S1 registration statement, "I would think BankAtlantic would be willing to entertain a sale of Ryan Beck," Mr. Savastano said.
One investment banker, who asked not to be named, said it is his understanding that BankAtlantic talked to several potential buyers before it decided to pursue the IPO.
Rumors about a deal between Ryan Beck and Friedman, Billings, Ramsey Group Inc. have circulated in recent weeks, though it is unclear whether the two discussed a potential deal before BankAtlantic filed for an IPO.
Richard Herr, an analyst with Keefe, Bruyette & Woods Inc., who follows Friedman Billings, said last week that clients told him its chief executive officer, Eric Billings, had told investors privately that his Arlington, Va., firm had looked at Ryan Beck but decided not to pursue a deal.
Keefe Bruyette, which is employee-owned, announced in late May that it would pursue an IPO. The attempt would be the New York investment banking firm's third in its 44-year history. However, it has yet to file the IPO registration with the SEC. The firm would not discuss the matter Thursday.
BankAtlantic said Alan B. Levan, its chairman, president, and CEO, was unavailable for comment Thursday.
Ben A. Plotkin, the chairman of Ryan Beck, did not return a request for an interview. A spokesman for Cowen would not discuss its IPO, saying that it is obeying a "quiet period" for the next 25 days. A Friedman Billings spokeswoman said it does not comment on market rumors.
BankAtlantic's shares fell more than 3% during Thursday trading, though it ended the day down 2.4%.
Matthias Rieker contributed to this article.
