Some thrifts just do an IPO, others may do a two step conversion via an MHC (Mutual Holding Company). The thrift can sell or merge with another bank after three years. The MHC’s will take longer due to when they decide to take the second step, but it would be three years after that date. But, please note it’s not a given they will look to sell after this period.
The reason they are interesting is they usually convert at discounted price to TBV. But you still need to look at other ratios that are fundamental to banks. But if they sell or merge, it is usually at a premium to TBV.
Also I updated a line in the above to clarify the risk of HMC’s, being that of a partial demutualization.
“A small number of thrifts have adopted this form of organization because it allows them to sell a minority interest in the business, with the insiders keeping permanent control and preventing a potential takeover. These deals are less attractive for investors. The real earnings power and real book value of the banks are understated, and the stocks don't have much lift.” - Peter Lynch
I prefer the thrifts that don’t IPO as an MHC, since it can take longer. However sometimes they can attract an activist or two.
Of course that can happen with a thrift that does a normal demutualization but goes past the three years as well.
I have had both happen and also own some thrifts that have surpassed the three years by a long shot. In some cases even if they do not sell, they increase dividends and buyback stock, but you can also come across some clunkers too, just as with any other company that may appear cheap. The latter can also occur even if an activist or large owner of shares is involved. So as always buyer beware.
For further interest in this area, I suggest following or subscribing to @Phil Timyan @Tim Melvin and @Chris DeMuth Jr
Thrift conversions usually don’t disappoint but you kinda need to buy it and forget about it.
easier said then done for most
Some thrifts just do an IPO, others may do a two step conversion via an MHC (Mutual Holding Company). The thrift can sell or merge with another bank after three years. The MHC’s will take longer due to when they decide to take the second step, but it would be three years after that date. But, please note it’s not a given they will look to sell after this period.
The reason they are interesting is they usually convert at discounted price to TBV. But you still need to look at other ratios that are fundamental to banks. But if they sell or merge, it is usually at a premium to TBV.
Also I updated a line in the above to clarify the risk of HMC’s, being that of a partial demutualization.
“A small number of thrifts have adopted this form of organization because it allows them to sell a minority interest in the business, with the insiders keeping permanent control and preventing a potential takeover. These deals are less attractive for investors. The real earnings power and real book value of the banks are understated, and the stocks don't have much lift.” - Peter Lynch
The two steps are thrift → HMC → IPO as public bank.
Are you suggesting keeping an eye on any news about a thrift converting to an MHC as a signal? Or what are you recommending?
I prefer the thrifts that don’t IPO as an MHC, since it can take longer. However sometimes they can attract an activist or two.
Of course that can happen with a thrift that does a normal demutualization but goes past the three years as well.
I have had both happen and also own some thrifts that have surpassed the three years by a long shot. In some cases even if they do not sell, they increase dividends and buyback stock, but you can also come across some clunkers too, just as with any other company that may appear cheap. The latter can also occur even if an activist or large owner of shares is involved. So as always buyer beware.
For further interest in this area, I suggest following or subscribing to @Phil Timyan @Tim Melvin and @Chris DeMuth Jr
Thrift conversions are a good bet although timelines can be challenging. Curious which one you like
cant wait