Sanchez Computer Associates Inc. of Malvern, Pa., has requested the withdrawal of an initial public stock offering for its e-Profile subsidiary.
Market conditions are not receptive to the value we believe e-Profile deserves in the equities marketplace, Michael A. Sanchez, the chief executive officer of e-Profile and chairman of Sanchez, said in a press statement.
The withdrawal request, filed Thursday with the Securities and Exchange Commission, follows a Sept. 21 hold that Sanchez put on e-Profiles IPO, which had been filed on Aug. 7. E-Profile provides core systems outsourcing for Internet-only banks and the Internet units of traditional banks.
An analyst speaking on condition of anonymity said the performance of Internet-only banks may have figured in Sanchezs decision not to spin off e-Profile. Web banking is a niche strategy that to date has seen disappointing account growth, the analyst said.
WingspanBank.com, an e-Profile client, is a good example of the type of customer that may be contributing to the lowered expectations, the analyst said.
Bank One Corp. had conceived Wingspan as a separate and parallel operation and invested heavily in a national advertising campaign to promote the brand. But lackluster account growth prompted Bank One executives to integrate the Internet bank back into the companys brick-and-mortar operations.
Matthew Fassnacht, a senior equity research analyst with J.P. Morgan Securities, said e-Profile would have no problem being a stand-alone public company. The trajectory of consumer online banking will be strong, and it will be a big deal, he said.
Still, Mr. Fassnacht called Sanchezs decision to pull the IPO a good move. The whole finance space is undervalued, he said. I would not be selling stock in this market.
Greg Ryan, director of corporate communications at Sanchez, said: The upside for e-Profile is all in front of us. Internet adoption is slower than what everyone predicted 18 months ago. But to think that the Internet as a viable delivery channel for financial services is going to go away, thats just ridiculous.
Mr. Ryan pointed to the growth of e-Profiles customer base as evidence of its viability. In the third quarter the companys client base nearly doubled from the previous quarter, to seven, and it processed 616,000 accounts, up about 6%.
However, several hundred thousand of the third-quarter accounts were from the Internet bank X.com, which announced in October that it would cease banking operations, he said.
E-Profile should not have a hard time finding clients, Mr. Ryan said.