Thursday, October 29, 2009

nice deal if you can get it.

Somebody tell me if I've got this right: Cascade Bancorp has two investors (one of whom is already heavily invested in the bank and is trying to save his investment) who will contribute 65 million.

Sounds good, right?

But, later in the announcement it says:

"The Private Offerings are subject to several closing conditions, including,
among others, (i) the completion of the Public Offering and the receipt of
aggregate proceeds for the Private Offerings and the Public Offering of at
least $150 million (net of underwriting commissions and discounts)."

So what they're saying is, they'll invest 65 million if Cascade Bancorp can convince the public to invest 75 million. Otherwise, the 65 million isn't at risk?

But of course, if they can get the rest of the public to commit 75 million, their 65 million isn't at much of a risk anymore, is it? In fact, these two investors can get close to half of the value of the new stock just by making the offer, but only pay if it actually succeeds?

So it's only at risk if it isn't at risk?

In other words, if they lose the bet, it never happened. They can only win this bet.

And whoever buys public stock is getting half the value?

Or am I missing something?

1 comment:

RDC said...

I do not believe that your interpretation of the offering is correct. You can read the actual documents in their 8-k filing on Edgar as

The delivery of the stock is dependent upon the fulfillment of the closing conditions. If those terms are not met he can pull his funds and the bank does not deliver the shares.

The closing conditions are contained in attachment 1 of their 8k filing which is the agreement for the private offering with David Bolger.

There are some advantages to him compared to the purchaser of the public shares. 1. His price is the need proceeds value or .87 cents per share. Which means that if the offer is well received his prive will be below the public price and he gets immediate return. If the price is lower then .87 then he is protected against that drop and also gets a margin of whatever the company is paying in fees for the public offering (i.e. net proceeds). So he does get a lower then public price. Not unusual in a private offering. He also gets his expenses for executing the transaction covered which might be as much as a million.

So it is not a case of the private buyers getting a 50% discount to the public buyers. Probably 15-20% is a more likely number.

In the current state of the bank that is a bargain.