PacWest (NASDAQ: PACW) stock price plunge continued this week following the collapse and acquisition of First Republic Bank by JP Morgan. The shares were trading at $6.42, meaning it has plunged by over 78% from the highest point this year.
PacWest’s strategic options
PacWest stock price surged last week after the company published strong financial results. The results revealed that the company had started to see some inflows, which was a sign of confidence in its business.
However, as I wrote here, buying the stock at the time was risky considering that challenges in the banking sector remained. And, using lessons from Credit Suisse, Silicon Valley Bank, and Silvergate, there was a high possibility that the stock would never recover.
Sadly, the situation has gotten worse in the past few days following the collapse of First Republic Bank. Many investors in regional banks have now started exiting their positions as concerns about more bank failures continue. This explains why the KRE ETF has tumbled in the past few days.
Now, PacWest is considering its strategic options, according to Bloomberg. These options include a sale of the company. However, the bank is struggling to execute a sale of its business because there are no enough buyers of the company since most investors remain concerned about the sector.
Also, potential buyers believe that waiting for it to collapse could reduce the amount of money they will finally pay for the company. JP Morgan would have paid more money for First Republic if the deal was announced a month ago.
Sadly, we have been here before. Before its collapse, First Republic Bank was considering selling its business but found no buyers. Therefore, the news of the company finding strategic options could push more depositors moving their money from the company.
PacWest stock price prediction
In light of all this, I believe that PacWest share price is heading to zero unless something miraculous happens in the next few days. I also believe that the bank’s collapse will happen during the weekend as outflows continue surging.
If this happens, PacWest will be the fifth American bank to fail this year after Silvergate Capital, Silicon Valley Bank, Signature Bank, and First Republic. It will also not be the first bank to fail since I expect that Western Alliance Bancorp to follow it in quick order.
Therefore, I believe that the PacWest stock price will crash to zero in the next few days. This situation can only be avoided if the company is acquired, which is highly unlikely.
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