Banc of California Faces ‘Crisis of Confidence,’ PL Capital SaysBy
Activist investor says bank needs extensive governance reforms
PL Capital increases ownership stake in bank to about 6.6%
Banc of California, the lender whose stock was dented by an anonymous short-seller’s report, is facing a "crisis of confidence and credibility," according to activist investor PL Capital LLC.
“The recent disclosures and actions taken to date by the company are completely inadequate to restore confidence,” Richard Lashley, a principal at PL Capital, wrote in a letter to the bank. He called for the Irvine-based lender to replace the law firm investigating the claims, saying the one it chose isn’t truly independent.
Banc of California’s stock plunged the most in a decade on Oct. 18, when the anonymous report was published on Seeking Alpha, noting the bank’s senior managers had ties to an imprisoned con man. The shares rebounded the next day when the company denied the claims. Lashley said he still thinks the bank is undervalued and bought more shares after the report, bringing PL Capital’s stake to about 6.6 percent.
Lashley also called for the bank to replace its board of directors, to ban related-party transactions and for its top executives to stop running other companies on the side. He’s been pushing the lender to improve its governance since mid-2014. In the Oct. 21 letter, disclosed Monday in a regulatory filing, Lashley reiterated his request to meet with the board.
The anonymous short-seller, who uses the name Aurelius, called the bank “un-investible” because of the alleged ties to Jason Galanis, a California financier. John Grosvenor, the bank’s general counsel, said an independent investigation has shown so far that Galanis has no control over the bank or a lending relationship with it. Lashley said that he was able to confirm some of the facts in the post, even if he disagreed with its thesis.
“While our own due diligence has uncovered many of the same troubling connections and questions that the Seeking Alpha blogger has, we do not agree with the blogger’s conclusion that the Banc of California is in effect a criminal enterprise secretly controlled by Jason Galanis,” Lashley wrote. “We clearly do believe significant changes are needed.”