In the case of Fifth third Bancorp, no news is bad news.
Two months ago, the high-performing Cincinnati company disclosed that neighboring Star Banc Corp. had rebuffed its unsolicited takeover bid. Fifth Third's share price, which was around $47 at the time of the offer, fell to as low as $41 last Wednesday.
Even a rebound of $1.75 on Thursday and Friday did not return the shares to the levels of earlier this year.
What is keeping the share price down is the wall of silence around the bank's headquarters. The bank has not even told its major shareholders whether it will make another offer for Star or seek to acquire another sizable bank. Fifth Third has hired J.P. Morgan & Co. as its investment bank.
Investors on Edge
In the absence of any news, investors are edgy. Teir anxiety is dampening a recovery in the normally high-flying stock.
"I'm baffled," said Donald S. Schmdit, managing director of Bartlett & Co., Cincinnati, a major investor. "I thought there would be some explanation of what's going on, at least more than we've heard."
Michael Milunovich, an analyst with Robert W. Baird & Co. in Milwaukee, said, "People are wondering about what is going on, and the uncertainty is keeping the stock from going anywhere."
On the other hand, Star's shares have risen because investors believe the bank cannot stay independent for long. From $29.50 a share before the offer, the price has risen to $34.50 at Friday's close.
Ripe for the Picking
Star, with $6.6 billion in assets, a return on assets of more than 1% in most of its units, and a presence in major Ohio cities, appears to be ripe for a takeover. And, if the companies do eventually merg, Star shares represent a cheap way to buy Fifth Third stock.
But investors counting on a merger and bidding up those shares had better hope Ffth Third tries again, analysts said.
"It would be very expensive for someone else to do it," said Henry C. Dickson, an analyst with Kemper Securities Group Inc., Chicago. "It won't happen."
Hard to Outbid
Fifth Third's shares trade at 278% of book value, higher than any other major bank. To outbid Fifth Third's offer of $38 to $40 a share in stock would surely dilute the per-share earnings of any other bank.
Other big Ohio banks including Banc One Corp., National City Corp., Society Corp. are tied up with recent acquisitions. PNC Financial Corp., which has a large presence in the state, is a potential bidder.
An acquisition of Star makes sense for Fifth Third, which has led some analysts to speculate that another bid is in the offing. Certainly, the company felt strongly enough to go public with news of the failed offer, most likely to put pressure on Star's directors. The bank declined to comment on its plans.
"Star is in its market, and Fifth Third doesn't want anyone powerful coming into that market," said Mr. Milunovich.
Stock Had Become Pricey
Fifth Third's price decline since its bid failed was expected, said some analysts. "People got concerned about the valuation," said Mr. Dickson, who rates the bank's shares a long-term buy. "It was trading high relative to other banks."
Indeed, the stock has been slipping since February, when shares reached a high of $50. The stock still trades at 1.8 times 1992 estimates earnings, among the highest multiples in the industry.
Investors, of course, say that while the multiple is high, so are the returns: return on assets of 1.65% and return on equity of 16.20% in the first quarter.
"Fifth Third characterizes most of the things you want to see in a bank," said Mr. Schmidt. "The shares should be accorded a premium."