Silicon Valley Postpones Offering After Price Drop
SAN FRANCISCO - Silicon Valley Bancshares has postponed its 1.2 million-share equity offering for two weeks because of a sharp drop in the stock's price, sources close to the company said.
The offering, the first by an independent California bank this year, was originally set to go effective last week. Observers regarded it as a test of the ability of state banks to raise equity in the public market.
But Silicon Valley shares dropped 16% between June 18 and June 27, when the company's board voted to postpone the offering. The stock closed at $10.50 on June 26, but later recovered to $11.50 when the stock issue was withdrawn.
Monitoring the Market
Asked about the postponement, Silicon Valley's president and chief executive, Roger V. Smith, said the company was "evaluating the market on a day-to-day basis" to decide when to go to market. He declined further comment.
But sources said the company will wait until second-quarter earnings, which will be released in the second week of July, before taking the offering to market. Company officials were said to expect that relatively stable credit quality and a slight reduction in real estate exposure might encourage buyers.
Fast growing Santa Clara-based Silicon Valley is a high technology and real estate oriented business bank with $776 million in assets. Despite its size, its stock is among the most heavily traded of California independent banks.
But Silicon Valley's shares have been hurt by concerns over its exposure to San Francisco Bay Area real estate. Construction credits represented 34.5% of total loans at the end of March.
Sources said the company's stock was pounded by Wells Fargo & Co.'s announcement Tuesday of a $350 million addition to loss reserves to cover credits for highly leveraged transactions and other commercial loans.