Silicon Valley's Stock Offering Sells Out
SAN FRANCISCO - Silicon Valley Bancshares, a business bank specializing in loans to high-technology companies, closed a 1.2-million-share stock offering on Friday at $10.75 a share.
The deal was the first equity sale by an independent California commercial bank this year.
An additional allotment of 180,000 shares will probably be sold to cover oversubscriptions, underwriters said.
The final price was well below the Santa Clara-based banking company's estimate of about $13 a share made in mid-June. Analysts said announcements of rising loan problems and lower earnings by major California banks hurt Silicon Valley, which has $838 million in assets. Press accounts focusing on the company's large portfolio of real estate construction credits also may have scared off some investors.
Equity Capital Is Out There
Despite the drop, the offering price was about 1.4 times Silicon Valley's book value. The outcome showed that California banks can raise equity under current conditions, analysts said.
"The window is open, but it's very narrow. Those banking institutions with a good story can come to market," said Philip Hage, an analyst with Van Kasper & Co., San Francisco.
The offering was originally scheduled for the end of June. But when Silicon Valley's stock price dropped sharply, the deal was postponed until second-quarter earnings were released.
Silicon Valley had record earnings in the second quarter, with net income up 16% over the same period a year earlier. In addition, nonperforming assets were marginally lower. But the strong numbers didn't change the stock price.
Deal Price Unaffected
"The deal was priced exactly where it would have been three weeks ago," said an underwriter.
After deducting fees, total proceeds will be about $14 million. About $5 million will be added to fast-growing Silicon Valley's equity capital, the company said. The remainder may be used to finance expansion.
Company officials have said they are considering bank acquisitions in Massachusetts, where Silicon Valley has a loan production office, and in the Seattle area, where many technology companies are based.