One For You Daytraders

pacific capital bank investmentFor the most part, I usually choose to not actively participate in day trading, most due to the time commitment required as well as the stress levels it can cause. However, every now and then something comes along that is worth a look.

PCBC is a Bank that has been on the decline since the turn in the market and has been flirting with FDIC takeover for the past 6 months. Just a few months ago, the bank found a saving investor to hopefully salvage sinking ship. Gerald Ford, founder of Ford Financial Fund, opted to invest $500 million in capital into the bank, in return for a majority of stock. Although, temporarily, it seems as though the transaction will be enough to keep the bank going, it has also heavily diluted shareholders of the stock, which has sent the stock sailing down.

The interesting part is that now the bank will be offering a unique opportunity for shareholders of the stock. According to their filing (which has also bee confirmed by their investor relations department), any shareholder of the stock as of close of August 30th (which is the day before the Gerald Ford transaction is set to close) will be given rights to purchase up to 15.335 times the shares they currently own at an offering price of $.20 per share. You do not need to be a preferred stock holder, this is open to the public.

Due to this, we have seen enormous amounts of volatility in this stock (up 20% yesterday, down 45% today). As we approach this August 30th deadline I expect to continue to see extremely large amounts of volatility followed by what should be a rather steep decline in the stock, as the $.20 offering deadline passes. Obviously, the main risk in this investment is whether or not the bank stays afloat. As for me, I am familiar with the bank, and am comfortable with their operations and I am also comfortable with Mr. Ford's ability to see a good deal. If you want to see some fireworks the next few days, tune into PCBC.

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6 comments:

  1. Anonymous Says:

    FF,

    I remember you were fundamentally bullish on RIMM back in 2008, since they have a very good balance sheet. Do you think it is now a good investment opportunity as everybody is bashing them?

    Thanks

  2. Finance Fanatic Says:

    Anon,
    A lot has changed in regards to RIMM's marketshare and players in the mobile PDA device market. iPhone has taken over as the main player, and the new Droid is not far behind. At the time, RIMM dominated the smartphone market. Their balance sheet still remains strong and I believe they will reinvent themeselves in some new ways that will put them back in the running, but currently, they are getting left in the dust. For me, its a little too early for a play.

  3. EFOF Says:

    What happened to the CBOX chat Finance Fanatic?

    It says the Cbox Expired? Any plans to renew it?

    -EFOF

  4. Finance Fanatic Says:

    Its back up EFOF.

  5. Anonymous Says:

    FF,

    It seems I called RIMM right at the bottom. I should trust myself more.

  6. 5a6a5g3obp Says:

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