A bad day for stocks became rockier for St. Paul Bancorp and Charter One Financial Corp., thanks to confusing newswire headlines and the skittishness of investors.
St. Paul, a Chicago thrift that is about to be acquired by Charter One of Cleveland, said Thursday in a press release that its shareholders rejected a proposal by a Keefe Managers to put the company up for sale.
Some investors concluded from the terse headlines that the Charter One deal was off, and rushed to sell shares. "There was some confusion," said Terry Maltese of Sandler O'Neil Asset Management.
St. Paul's received about half a dozen calls in 10 minutes, said Robert E. Williams, St. Paul's director of investor relations. "I'm quite sure people were shocked when they saw that headline," he said. "Right after the release cleared the wire, the phone started ringing."
St. Paul's and Charter One's shares recovered during the day as word of the miscommunication filtered through the market. St Paul's shares were off only 37.5, cents to $26.0625, after dropping as low as $25.25, while Charter One's were off 43.75 cents, to $28.5625, after slipping to $28.
"The Charter One transaction is still going forth," Mr. Williams said. The idea of shareholders voting against the transaction "didn't make sense. It was not long before people figured it out."
At St. Paul's shareholders meeting Wednesday, the rejection of the Keefe proposal was a mere formality, said analyst Stephen Skiba of ABN Amro. The shareholders also reelected John W. Croghan, Kenneth J. James, and Anthony R. Pasquinelli to the board of directors at the company's annual meeting. And in preparation for the merger, the company rescinded its share repurchase program.
Keefe Managers still sees St. Paul's deal with Charter One as a victory, said John J. Lyons, president of the hedge fund. "Why the company would report on the Keefe proposal in a press release, I don't know," he said. "But we are dumb, fat, and happy about their decision to sell to Charter One."
Some observers attributed the reaction to the wire headlines to negative sentiment about the upcoming deal. Since May 7 shares of Charter One have fallen more than 10%, while the Nasdaq bank index has fallen just 4% during the same period.
"If a sentiment like that does exist then those people are wrong!" Mr. Maltese said. "Charter One has done several of these kinds of acquisitions and has made them all work. The synergies in this deal are enormous."