Mark Twain Bancshares stock surged Tuesday after the St. Louis holding company announced a plan to list its stock on the New York Stock Exchange.
Mark Twain, which trades on the Nasdaq system, rose 87.5 cents, to $37.875 a share on a day when bank stocks generally continued to lose ground. The Standard & Poor's bank index fell 0.02%, as investors took profits on banks' record-breaking rally last week. The Dow Jones industrial average rose, by 0.38%, as did the S&P 500, up 0.33%.
Analysts said Mark Twain would gain visibility and liquidity by listing its stock on the Big Board starting in September. In recent months, the Nasdaq has undergone probes by regulatory agencies on its trading practices, but analysts said this was not a factor in the bank's decision to switch.
Although the market responded favorably to the company's plan, analysts pointed out that it is rare for smaller bank companies to make the shift and that the move sometimes carries risks.
Elizabeth Summers of Ryan Beck & Co. noted that smaller banks want to move to the New York exchange because they are "fed up" with the lack of liquidity for Nasdaq stocks. The illiquidity manifests itself in a wide bid-ask spread - the gap between the price listed for a stock and the cost to a buyer.
The NYSE also has more prestige, she added.
However, Ms. Summers noted that, while the bid-ask spread may narrow on the bigger exchange, "illiquidity can show in another place such as the stock price."
Matthew Finn, an analyst at Burns Pauli Mahoney, which makes a market in Mark Twain stock, said small companies that move to the Big Board can lose the sponsorship of small regional research firms, which tend to trade in the stock of the firms they are covering.
"There is a danger that when those companies cannot make a market in your stock, there isn't an incentive to follow you," he said, adding that his company would continue to follow Mark Twain.
He added that he also has "some initial concerns" that Mark Twain simply is not large enough and could get "lost" among the better known issues traded on the New York exchange.
However, Mr. Finn said, Mark Twain's superior performance offsets those risks.
"Only five of the New York Stock Exchange-traded banks come close to Mark Twain's return on assets, which is 1.73%," he said. "They also have had record performance for 21 consecutive quarters; there are very few that match that type of financial performance."
Mr. Finn added that Mark Twain could pick up a greater percentage of institutional investors by moving to the New York Stock Exchange. The average institutional ownership of banks on the NYSE is 40.75%, compared to 12.6% for Nasdaq bank stocks. Institutions own 21% of Mark Twain.
"Normally, I would say it is not advisable for small banks to list," he said, "but while Mark Twain runs a small risk of losing some sponsorship, performance is what will keep it visible."