Wedbush Sale Looks Bad for Great American
Wedbush Corp., Great American Bank’s largest shareholder, has sold part of its stock in the savings and loan, a move that observers say may be a negative sign for the besieged S&L.;
According to proxy materials mailed recently to shareholders, Wedbush had reduced its holdings in Great American as of April 17 to 3,657,923 shares, or 15.3% of the 23,969,968 total Great American shares outstanding. A year ago Wedbush owned 4,074,023 shares, or 17% of the total outstanding.
Wedbush Chairman Ed Wedbush, who is a member of Great American’s board of directors, and Vice President Philip LoBue were unavailable for comment Tuesday on when, why or at what price the shares were sold. Sources close to Great American say Wedbush has been selling shares in recent weeks, however.
Whatever the sale price, Wedbush has taken huge losses on its investment in Great American. The firm is believed to have paid a total of $45 million, or an average of about $11 per share, for the 4 million-plus shares it owned a year ago. With Great American shares now selling at $3 each, Wedbush’s loss on its remaining holdings alone could exceed $25 million.
Los Angeles-based Wedbush Corp. is the parent company of Wedbush Morgan Securities, a stock brokerage. According to LoBue, all Great American shares are owned by the parent company. Wedbush Morgan Securities is separately capitalized and in no financial danger, LoBue said, despite the parent’s huge losses on the S&L; stock.
Gary Gordon, a stock analyst with PaineWebber investment bankers in New York, said Wedbush’s stock sale is “clearly a negative” for Great American.
“This guy is an insider and he’s actively selling, a member of the board of directors and he’s shrunk his position,” Gordon said. “That’s an interesting issue for the stock.”
Shares in Great American, the nation’s eighth largest S&L; with assets of $15.9 billion, have taken a beating in recent months as the S&L; has been progressively weakened by problem loans in Arizona and elsewhere in the Southwest. While shares closed down $.25 at $3 per share in New York Stock Exchange trading Tuesday, they have traded as high as $14.875 each over the past year.
Last month, Great American reported a 1989 loss of $263.4 million for 1989 and said its capital position had weakened to the point where it faces a possible regulatory seizure unless it can raise $350 million or sell itself in part or whole to an outside institution by Dec. 31.
An insider stock sale such as Wedbush’s could lend support to the pessimistic view held by many Great American observers that the S&L; is having a tough time finding a buyer. However, others speculated that Wedbush may have had to sell stock to satisfy margin calls or to reduce an over-concentration of investment in Great American if some of the shares are held by Wedbush’s employee pension plan.
Great American’s annual shareholders meeting will be held May 24 at Copley Symphony Hall in downtown San Diego. The meeting could be a stormy event, given shareholder dissatisfaction over Great American’s stock price slide. A sign of that dissatisfaction is the fact that Great American and its management have been slapped with five shareholder lawsuits since October 1989, according to the proxy statement.
The proxy statement also says that Great American Chairman Gordon Luce earned a base salary of $598,540 in 1989, a 7% raise from the previous year. But Luce’s total cash compensation in 1989 declined because he received no incentive bonus, which in 1988 totaled $68,371.
Great American President Roger Lindland received base pay of $355,131 in 1989, a 9% raise from the previous year. But his total compensation also declined because he received no incentive bonus, which in 1988 totaled $29,934.
