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Non-Tech : Sovereign Bancorp ( SVRN )
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To: alex pierson who wrote (113)10/19/1999 10:45:00 AM
From: Mark Peterson CPA   of 143
 
Alex, re SVRN

1. Educate or replace management.

They clearly have their interests at the front and presumably, ours, too. But you've gotta wonder about their complacency with the stock's P/E ratio. Don't know if new faces, without the authority, would make a difference.

2. Cancel the Fleet deal.

This is clearly the overhang today. Nobody wants to get in front of SVRN's issuance of additional stock to fund the purchase. With a huge expected offering in the near term, short-term stock appreciation is sure to be put on the back burner.

3. Sell the bank.

Makes the most sense to me. Maybe 2.5 times net book value, maybe higher in a better financial market, which would return to long-term shareholders much of the returns lost during the last year. A sale sounds great. But who would buy? Much of their growth came from acquisitions of isolated banking units that were required to be sold as a condition of approval for other bank mergers. Seems to me those larger institutions wouldn't be buyers. If not them, then who?

But no question about it, this stock has seen better days. Personally, I'm beginning to wonder if their earnings aren't a bit manipulated with all those recurring "non-recurring" and "one-time" charges. Will there ever be a day when they end?

Mark A. Peterson
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