Investor skepticism over whether Flagstar Bancorp Inc. will get capital from the Treasury Department has punished the Troy, Mich., company's stock to the point that it is in danger of being delisted.
The $14.2 billion-asset company said Wednesday that the New York Stock Exchange has said its listing is in jeopardy because Flagstar's stock has traded below $1 per share for at least 30 consecutive days.
To avoid a delisting, it must get its average stock price above $1 for 30 straight days within the next six months.
Flagstar's shares have slid for months as loan losses have piled up, but the decline accelerated in recent weeks as it awaited word on its application to participate in the Treasury's Troubled Asset Relief Program.
The company disclosed it had applied for the funding on Oct. 31, and since then its stock price has fallen by about 70%, to 60 cents at Wednesday's close. The shares first dipped below $1 on Nov. 11.
Though there is no exact timetable for Tarp approval, seven weeks appears long for a company of Flagstar's size. (The Treasury on Tuesday announced the names of 28 more institutions that have gotten Tarp capital, bringing the total to 86 institutions as recipients of $167.8 billion.)
"Most institutions of that size should have been told by now," said Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp.
Bose George, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said that several companies have been waiting as long or longer for word from the Treasury and that Flagstar may be facing extra scrutiny because its loan portfolio is dominated by mortgages.
Still, Mr. George said, "we don't have a good feeling as to what is going to happen. The market clearly is assuming that they are in the category of having to raise capital on their own."
Flagstar officials did not return calls for comment. The company has not disclosed how much Tarp money it is seeking, but according to a report from Keefe, Bruyette & Woods, it is eligible for as much as $260 million.
Flagstar lost $56.9 million in the first nine months of the year, and at Sept. 30, 3.87% of its assets were nonperforming, compared to 1.34% a year earlier.
The company ended the third quarter with total risk-based capital of 11.10%, so not getting Tarp money would not necessarily put it in a situation where it had to sell itself, Mr. George said.
But not getting Tarp money "would clearly be a reflection of the regulators' view of the company," he said.
One possible scenario for Flagstar, Mr. George said, could be receiving Treasury money contingent upon a separate, private capital raising.
In a similar case, Bridge Capital Holdings in San Jose said in a press release this month that its $24 million of Tarp funding was subject to the company's closing a $30 million private placement.
Flagstar investors could oppose that kind of conditional deal, Mr. George said, because a common stock offering would be highly dilutive.
If Tarp money does not come through and the company's stock does not rebound, he said, the company could market its stock over the counter or do a reverse stock split to increase the price.
