The hard times for Old Second Bancorp, Inc. (NASDAQ:OSBC) continued yesterday with another dramatic fall of the stock price. Expecting the second quarter results and the outcome of the special shareholder meeting, investors are still in a highly pessimistic mood.Old Second Bancorp’s stock sunk yesterday another 2.76% to a new 52-week lowest value and closed at $1.76 for a share. It seems that the market is selling out again, the trading volume of over 196,000 was higher than the previous day and there are still no signals for the stock to improve soon its long-term oversold status.
Yesterday the company announced that its financial results for the second quarter of the year will be filed tomorrow. According to investors’ reaction, no positive surprises could be expected on that matter, but this does not seem to be the only reason for the negative attitude towards the bank holding company. Moreover, the further tanking came yesterday on an overall up move of the other financial industry stocks.
The severe downtrend for Old Second Bancorp started already at the end of April as the need to increase the number of authorized shares were made public and the anticipated dilution must have immediately scared investors away.
At the beginning of this month, the date for the special shareholder meeting has been officially appointed. The event will take place on August, 2 and items of high interest will have to be voted, for all of which the Board of Directors advises the shareholders to vote “For”.
First of all, the number of authorized shares of common stock is to be increased from 40 million to 60 million, and secondly, some trust preferred securities of the company are to be exchanged against up to 6 million newly issues shares. It looks like the management sees the improvement of the capital structure as a crucial point for the future of Old Second Bancorp, and that it will be at the cost of considerable dilution seem not so important right now.
Currently, there are 13.94 million shares outstanding. Given that the shareholders follow the Boards’s appeal, with the new 6 million shares issued they will be diluted by more than 43%.
The Board of Directors has taken the obligation to maintain regulatory capital in excess of required minimums, but without raising additional equity, which is a component of the regulatory capital and without reducing the indebtedness at the same time, there is the concern that the condition will not be met in the future.
Assets are decreasing stably as it seems that Old Second Bancorp is not able to find reliable borrowers and the market obviously also does not expect the loan portfolio will not improve soon. Net losses also continued over the past four quarters.
