initial public offerings (IPOs) trading on American exchanges

Friday, May 11, 2012

Customers Bancorp : Sidhu says IPO pulled because of investors

Customers Bancorp, led by former Sovereign Bank CEO Jay Sidhu, has put off a stock offering. The Wyomissing, Pa., company said the decision was based on market conditions. 

 May 10--It only took Jay S. Sidhu, chairman and CEO of Customers Bancorp, two days to realize that he wasn't going to get the price he wanted from institutional investors for the bank's proposed initial public stock offering.

Customers Bancorp, Wyomissing, told the Securities and Exchange Commission Tuesday that the bank was withdrawing its pending $115 million IPO.

Last week, Keefe, Bruyette & Woods, underwriters, had priced the IPO at $13 to $15 a share. Sidhu said the investors told him that they wouldn't pay $13 a share, saying they could not value the stock higher due to trouble in the European markets. It didn't help that U.S. financial stocks fell during the two days as well.

We called on 20 different investment houses in New York and Boston over two days and there was a lot of interest, but at a certain price, Sidhu said. We weren't willing to accept that price, so I said let's postpone it. I don't see major improvement on the markets.

After Sunday, Customers Bancorp would have been required to supply new information to the SEC. The SEC doesn't track IPOs that are withdrawn, a spokeswoman said. The next opportunity to pursue an IPO would have been in July, and Sidhu said he didn't expect the turmoil in the world markets to be much better by then.

It was a quick decision to pull the IPO so it would not dilute the stock of existing (private) shareholders, Sidhu said. John S. Walker, finance professor of the College of Business at Kutztown University and a chartered financial analyst, said the decision to pull the IPO based on the sentiment of the institutional investors indicated that they are looking at the current earnings per share, two previous years of losses (because of acquisition costs) and the assumption of future growth in the community bank sector, which is filled with uncertainty. Evidently, they felt the $13 to $15 a share was too rich, Walker said. Sidhu said the bank will raise money privately as it has done since he took over the former New Century Bank in 2009. We're not desperate for capital, Sidhu said. We're a strong bank with lots of capital. We'll focus on raising private capital over the next two or three months. Sidhu said he doesn't expect Customers Bancorp to re-enter the IPO market before next year.

A spokesman for Keefe, Bruyette & Woods said he would not comment.

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