First Alliance to Go Public With Rather ‘Unusual Deal’

Who would want to buy the initial offering of Class A common stock in First Alliance Mortgage Co., a 25-year-old private company going public next month?

New investors would get a small stake and a tiny voice in the Irvine firm. They wouldn’t get any dividends, and most of the $55 million expected to be raised would go to founders Brian and Sarah Chisick. “It’s an unusual deal,” said one local business consultant.

But the Chisicks and chief financial officer Mark K. Mason figure investors will want to buy into a long-established company that has high growth potential, based on its recent performance and expansion into 10 other states.

“I think investors are interested in increasing value,” Mason said. “We don’t think there will be a problem selling.”

Several years ago, First Alliance began selling its mortgages in packages to Wall Street instead of individually to investors. That lowered costs and helped the company double earnings to $30.5 million last year from $14.9 million the previous year.

The only profit new investors could hope to see would be an increase in the stock price, which is expected to start at about $18 a share. They’ll get 3.25 million shares, or 23.8% of the company. But each Class A share has one-fourth the voting power of each of the 10.75 million Class B shares, giving new investors only a 7.2% voice in the company. The Chisicks own 99% of the Class B stock, and Mason owns the remainder.

In addition, $43 million to $47 million of the money raised will go to the Chisicks as profits that the couple did not take out of the company previously.

“Voting used to be a greater issue, but it’s not so much one now,” Mason said.

James S. Granelli covers financial institutions and fraud issues for The Times. He can be reached at (714) 966-5810 and at james.granelli@latimes.com