Trading Diary: Waiting for the Cadence Bancorp IPO

With stocks and bonds becoming the moral equivalent of quicksand, we still look to the IPO market to give our moribund portfolios some juice. Cadence Bancorporation, anyone?

Cadence Bancorp logo. Image via Wikipedia entry on the bank.

WASHINGTON, April 11, 2017 – Once again, from an active trading standpoint, we don’t have much to contribute today, other than our continued pursuit of IPOs that might offer us some decent returns while the market as a whole is behaving badly.

Trading Diary:

Slim pickin’s so far this week, as the only IPO our brokerage firm currently has on offer is Cadence Bancorporation (proposed symbol: CADE). Aside from the usual prospectus gobbledygook, there’s not much external info available on this one, which makes its relative desirability hard to fathom.

The only outside commentary we’ve currently been able to unearth appears in an article by regular SeekingAlpha contributor Don Dion, who describes CADE as follows:

“Based in Houston, Texas, Cadence Bancorporation is a financial holding company that offers commercial and personal banking, mortgage financing, investment management, and insurance services through its subsidiaries.

“We previewed this deal on our IPO Insights platform.

“Cadence Bancorporation will offer 7.5 million shares at an expected price range of $19 to $21. If the underwriters price the IPO at the midpoint of that range, CADE will have a market capitalization of $1.7 billion.”

Dion gives this one a cautious thumbs-up:

“Although slightly low profile, CADE boasts solid fundamentals and a strong underwriting team.

“We are optimistic on this Goldman-led deal and the company longer-term.

“While it may be currently priced slightly above its peer group, we nevertheless are looking forward to the IPO and are currently hearing that it is oversubscribed.”

CADE’s current pricing range is listed as falling somewhere between $19-21 per share. The likely good news is that this should at least prove to be a relatively stable investment in a troubled market environment. However, the bad news is two-fold.

First, the Trump-inspired banking rally finally got way ahead of itself, and the stocks of most banks seem to be in a protracted, rolling correction right now. So if CADE prices up, it might be pricing itself too high. That would mean the IPO has a potential to drop rather than pop when it opens for regular trading Thursday morning; which, in turn, will be a slow and treacherous trading environment, given the upcoming Easter holiday weekend with markets closed for trading on Good Friday.

Second, Dion is “hearing that it is oversubscribed.” If that buzz is true, this means that too many investors are chasing too few shares; meaning that little investors like this one will likely get zero shares, since rich guys get “oversubscribed” shares first as a general rule of thumb.

It looks like we’ll just have to wait until this puppy prices sometime Wednesday evening. Then, as usual, we’ll have to make our final decision. Which we’ll then tell you about in an upcoming column.

Aside from the IPO stuff, we are not enthusiastic about buying anything in this rudderless and slightly scared market. Too dangerous in what still looks like a top-heavy stock environment

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17