October 17, 1997: American Banker
Plan to Issue More Shares
Sends Cityscape into
Tailspin
By Heather Timmons
Cityscape Financial Corp. shares have plunged more than
37% this week.
The stock closed at $6.1875 Thursday, down from $9.962
on Oct. 10.
Analysts said investors were reacting to the company's
plan, disclosed Tuesday in a filing with the Securities and
Exchange Commission, to offer an additional 10.5 million
shares of common stock.
The move would increase Cityscape's shares outstanding
by 33%, to 42.2 million shares.
The sharp price decline for Cityscape, a subprime
mortgage lender based in Elmsford, N.Y., occurred on huge
volume. By midday Thursday trading activity was six times
the stock's average daily volume of 488,000.
Cityscape officials seemed baffled by Wall Street's
reaction. "This was a very routine activity that has been
taken out of context," said managing director Steven Miller.
"It's not on behalf of selling shareholders."
The company did two preferred convertible stock offerings
this year, totaling $100 million. It is required to have
enough common shares available if those shareholders
want to convert, Mr. Miller said.
But investors are apparently gun-shy. Cityscape's stock has
been rocked over the past twelve months by lawsuits,
rating agency downgrades, and regulatory scrutiny in the
United Kingdom.
Most recently, Moody's Inves-tors Service downgraded the
company's debt this week. |
