Stephen Rosenman
Long/short equity, deep value, special situations

Coastway Bancorp: Don't Buy Into This Bank Conversion

There are 500 mutual savings banks. Together their balance sheets hold billions of dollars in equity - all of which "theoretically" belongs to their depositors. Of course, if the mutual stays a mutual, the customers will never see a dime of that wealth. However, once in a while, one of these mutuals converts to a stock company, unlocking literally decades of accumulated wealth for depositors who decide to become shareholders. As Peter Lynch famously observed in "Beating The Street," bank stock conversions come public at large discounts to tangible book value. Unlike most public offerings, all the money raised in these IPOs is added to the bank's equity - none goes to pay off original shareholders. As a result, newly...

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