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Comment by newaccount2023 | Hacker News Reader

newaccount2023

they have $30 bln in new deposits

its the same bank they were two weeks ago, but with a $30 bln buffer

why do anything?

so what, the stock collapsed...if the business is still basically sound (and I have yet to see material evidence to the contrary), then it will move back up

maybe there is evidence not brought to light...but otherwise, we're talking about a mid-size bank on good terms with regulators that has a P/E under 2 (!!!)

this almost feels manipulated to the downside...

and please don't respond with "bank run blah blah" every bank in the world is subject to that risk

FRB seems actually better off in that its depositors don't need to empty their accounts to pay off the lease on a used minivan

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Why are you trying to yada yada a bank run?

If First Republic bleeds depositors (especially HNW depositors where they're concentrated) then it is going to go out of business. It doesn't matter if the bank run is "justified" or not -- the perception of fear is enough to scare depositors away, which would make it a self fulfilling prophecy.

That said, there are good fundamental reasons to be bullish, which is why (full disclosure) I am still long $FRC. But I'm feeling increasingly unhappy about it.

FRC is now down to $15/share from a high of $170 so it's no surprise that anyone that's holding FRC is running scared. If it fails, however likely/unlikely as it may be, what we've seen is that shareholders will be zeroed out by the FDIC (at least in the immediate term, there's at least one lawsuit pending, and we'll have to see how much can be recovered), or in a purchase by, say, JPM, then it's likele not even worth that much. A bank in recievership after a bank run is worth about as much as a Snickers bar, as Matt Levine opined, and a Snickers bar split a million ways is not worth the digital bits the certificate is printed on.

There are so many people who are long FRC because they like the service or want the bank to survive, but the only thing that matters for valuing a bank stock is the deposits and the revenue they can make off of them.

Based on the news from the last several weeks, it's clear that the uninsured deposits have fled First Republic. The hole is being plugged temporarily by the consortium of banks but that will only be temporary. The next disclosure date will make it clear that FRC is not worth anything close to what it was previously.

Buying the common stock is a huge bet that First Republic can bounce back to what it was prior to this crisis, but that's looking extremely unlikely.

> it's clear that the uninsured deposits have fled First Republic

their customers are high-net-worth so this would basically means almost all customers have left FRB, which is obviously not the case

at this point the stock is so cheap you don't even need it to get back to previous levels to make a killing...even if it ends up at a 50% discount from its peak, thats 4x from the current price...which gives you an indication of how irrational the panic selling has become

Assuming that it doesn't go bankrupt or get fire-sold - both of which are very possible outcomes at this point.

#1 on Peter Lynch's list of mistakes an invester can make : "It can't go any lower." Any stock - including stocks of high-flying blue-chips - can go to zero.

https://www.flowbank.com/en/research/10-sayings-that-will-pu...

Stocks do not go to 0 on the open market, and delisting does not imply 0 value

List a stock whose trade price was $0.00, I'll wait

Shareholders can absolutely get wiped out though.

For example, in the 2009 chapter 11 bankruptcy of GM [1], the assets of "old GM" (the one publicly traded on the NYSE) were sold to NGMCO ("New GM Corporation"), owned by the creditors of GM. Old GM continued to trade on the pink sheets as GMGMQ, and then was renamed MTLQQ ("Motors Liquidation Company") and then MTLQU ("Motors Liquidation Company General Unsecured Creditors Trust") [2]. New GM went public again in 2010 after emerging from bankruptcy protection, which is why if you look up "GM" on Yahoo Finance its history only goes back to 2010.

You can still trade MTLQU on the pink sheets [3], but its market cap is about $10M and it makes no profit - it's basically just a trust to settle litigation. If you held old GM stock going into bankruptcy in 2009 you were basically wiped out. The new company is owned by the creditors (which is kind of the point of bankrupty).

[1] https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...

[2] https://en.wikipedia.org/wiki/Motors_Liquidation_Company

[3] https://www.gurufocus.com/stock/MTLQU/summary

SVB and Signature bank shareholders have been wiped out literally in the last 2 weeks

From two weeks ago, how would you describe the current price of SIVB?

> Buying the common stock is a huge bet that First Republic can bounce back to what it was prior to this crisis, but that's looking extremely unlikely.

Why not? If they do bounce back, I don't think that in ~10 years from now people will still think of them as being any worse than any other bank.

Sure but if you got in at, say, $80/share, you have to wait 10 years to get back to that , you'd need to get 8% return every year just to break even unless the sector has a serious bounce. Right now that doesn't seem likely, but whoo knows.

Well it's $12.18/share now, so now doesn't seem like a bad time to take up a long position. Maybe if you've already lost something then it will be a while before you've made up the difference (or never), but having lost money at $80 as a reason not to be long at $12 seems like the sunk cost fallacy to me.

I like First Republic. They don’t charge ATM withdrawal fees when using it internationally. I hope their services will not degrade. Carry on FRC.

>a P/E under 2

FWIW, banks are priced on Book Value (that's literally what the stock in a bank represents, whether it's public or private - banks aren't like normal operating companies), since earnings are volatile and dependent on outside factors. FRB's book value is anyone's guess ATM, but it's probably quickly becoming negative given the bank run blah blah

Also, for companies that are priced on earnings, they're priced on forward earnings, which is assumed to be extremely negative for FRC.

> the stock collapsed

Bank equity is weird because it directly feeds into the funding cost for the bank’s massively-levered balance sheet. That said, I agree something is off here. First Republic (and Credit Suisse) may be (and have been) better off as private companies.

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