First Community Bancshares, A Bad Secondary Pricing That Isn’t So Bad (FCBC)

First Community Bancshares, Inc. (NASDAQ: FCBC) looks as though it gave away the store in a secondary offering pricing, but when you look at the dilution it is actually not as bad as it may seem.  This banking company decided to sell 4.6 million shares at a price of $12.50 per share.  Another bank is paying back its TARP funds.

The Bluefield, Virginia-based holding company is a $2.20 billion institution and is the parent company of First Community Bank, N.A.  The market cap is listed as roughly $150 million based on the new share price, but this may not be adjusted for the new $50 million worth of shares. The company said the new fund will allow it to repurchase its TARP investment upon receipt of government approval, and will also allow the company to boost its tangible common equity and support its growth and expansion plans.

When you consider that shares had nearly doubled off of lows and the dilution may be as much as one-third, suddenly the offering doesn’t look so bad.  On the surface it looked like one of the weaker secondary offerings.  That initial look turned out to not be the case.

Sandler O’Neill was the lead book-running manager and Raymond James was the co-manager for the offering; the underwriters will have a 30-day option to purchase up to an additional 690,000 shares of common stock.

This one closed at $14.39 yesterday.  Shares are trading down just over 10% at $12.85 after the open, and its 52-week trading range is $7.90 to $39.00.  This discount looked steep and in reality it is.  But this pricing and the reaction to the pricing is actually not so bad considering the size of the offering and the market cap.

Jon C. Ogg