• PacWest Bancorp’s stock PACW has experienced a record low of $3.17 after the company announced it is exploring strategic options.
• Despite assurances from the bank and Federal Reserve, investors remain wary, causing a 60% drop in the last 24 hours.
• Experts are divided on whether this could lead to insolvency or not.
PacWest Stock Plunges To Record Low
PacWest Bancorp (PACW) saw its stock plunge to an all-time low of $3.17 in pre-sale on May 5th after the bank stated they were exploring strategic options. This followed an 80% decline earlier in March due to Silicon Valley Bank contagion that has plagued middle-sized US lenders since, tanking First Republic Bank.
Bank’s Assurances Not Enough To Calm Markets
Despite assurances from PacWest representatives that their deposits increased since and confirmation of talks with potential investors, investor angst remains high as seen in the 60% drop within the last 24 hours. People associated with the matter claimed that no formal auction process had been started yet, despite being open to a potential sale.
Experts Divided On Bank’s Outlook
Greg Nini, a finance professor at Drexel University, called out vulnerabilities such as high-interest rate securities and uninsured deposits as “important ingredients” for a possible collapse outcome while Julian Vogel disagreed with the grim outlook from an investor standpoint.
Why The Panic?
The panic over PacWest stems from worries about another bank run similar to what happened when First Republic Bank was sold off back in March. There is fear that if enough depositors withdraw their money it could cause serious financial instability for the bank leading to insolvency and failure due to lack of funds or liquidity issues caused by withdrawals from other customers who fear their money isn’t safe there anymore either.
Ultimately, only time will tell if PacWest can weather this storm or not but according to analysts there is still some hope left as long as they can hold on until things get better economically and confidence returns among both customers and investors alike.