SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders with Losses on their Investment in PacWest Bancorp of Class Action Lawsuit and Upcoming Deadline – PACW
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Sep 19, 2023, 11:15 AM ET
NEW YORK, NY / ACCESSWIRE / September 19, 2023 / Pomerantz LLP announces that a class action lawsuit has been filed against PacWest Bancorp ("PacWest" or the "Company") (NASDAQ:PACW) and certain officers. The class action, filed in the United States District Court for the Central District of California, and docketed under 23-cv-01685, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired PacWest securities between February 28, 2022 and May 3, 2023, inclusive (the "Class Period"). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 ("Exchange Act").
If you are a shareholder who purchased or otherwise acquired PacWest securities during the Class Period, you have until November 13, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at firstname.lastname@example.org or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
PacWest operates as a holding company for its wholly-owned subsidiary, Pacific Western Bank ("PWB"), a regional bank based in Los Angeles, California. To support its operations, the Company depends primarily on deposits and external financing sources. Accordingly, PacWest purports to offer "traditional deposit products to businesses and other customers with a variety of rates and terms, including demand, money market, and time deposits" to small, middle-market, and venture-backed businesses.
As the holding company of PWB, the value of PacWest's deposit base is dependent upon interest rates established by the U.S. Federal Reserve (the "Fed") for federal funds-i.e., excess reserves that commercial banks and other financial institutions deposit at regional banks which can be then lent to customers. Specifically, when the Fed raises interest rates for federal funds, the value of fixed income securities declines. For example, beginning in March 2022, the Fed raised interest rates approximately eight times over the course of a year, elevating the federal fund rate from neatly zero to a target of 4.5% to 4.75%. As a result, by early March 2023, the S&P U.S. Government Bond Index, which tracks the performance of U.S. dollar-denominated U.S. Treasury and U.S. agency debt issued in the U.S. domestic market, was down 6.4% over the preceding 12 months.
Following the Fed's series of aggressive interest rate hikes, in early March 2023 several small- to mid-size U.S. banks failed in rapid succession, triggering a sharp decline in global bank stock prices and widespread depositor concerns. In particular, regional banks Silvergate Bank ("Silvergate"), Silicon Valley Bank ("SVB"), Signature Bank, and First Republic Bank ("First Republic") each experienced severe liquidity crises that ultimately led to voluntary liquidation and/or regulatory takeover.
Taken together, the collapses of Silvergate, SVB, Signature Bank, and First Republic, all of which were smaller banks with excessive concentration in specific industries, highlighted the specific risks associated with banks with similar concentration and liquidity profiles-i.e., like PacWest, given its venture-focused business model and primarily small- to middle-market business deposit base. What is more, Silvergate and SVB specifically cited the Fed's aggressive interest rate hikes as being a contributing factor to their collapse. Accordingly, in response to the various bank failures, on March 10, 2023, PacWest issued a press release to reiterate the supposed strength of the Company's financial position, stating that PWB is a "well-performing, well-diversified, full-service commercial bank with more than twenty years of history."
The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (i) PacWest had understated the impact of interest rate hikes on PWB, a smaller bank with excessive concentration in specific industries; (ii) accordingly, the Company had overstated the stability and/or sustainability of its deposit base; (iii) as a result, PacWest was exceptionally vulnerable to excessive deposit flows and/or a liquidity crisis; and (iv) as a result, Defendants' public statements were materially false and/or misleading at all relevant times.
However, on May 3, 2023, less than two months after PacWest reassured investors of its financial strength, Bloomberg published an article entitled "Regional Banks Sink as PacWest Weighs Strategic Options." According to Bloomberg, "PacWest Bancorp led a renewed slide in regional banks after a report that it's weighing strategic options including a sale heightened concerns that the turmoil engulfing smaller lenders is far from over[,]" and "[t]he sector has been under pressure as rising interest rates lowered the value of their longer-term investments while increasing the cost of funding and spurring depositors to move cash into higher-yielding money market funds."
Shortly thereafter, Forbes published an article entitled "PacWest Stock Falls 39% After Federal Reserve's Latest Interest Rate Hike." The Forbes article stated that "[h]igher interest rates intensify the spread of the latest bank failure virus that drives deposits out of vulnerable banks, tanks their stock prices, and ultimately prompts an FDIC-enabled rescue[,]" and "the big loss an acquirer would incur to mark down the value of some PacWest loans makes it unlikely a buyer will emerge for the entire bank."
Following the publication of the Bloomberg and Forbes articles, PacWest's stock price fell $2.84 per share, or 44.17%, to close at $3.59 per share on May 4, 2023.
Then, on May 11, 2023, PacWest disclosed in a Quarterly Report filed on Form 10-Q with the SEC that that it had lost a significant percentage of its deposits following the publication of the Bloomberg and Forbes reports. Specifically, the Company stated that "the news headlines increased our customers fears of the safety of their deposits. During the week ended May 5, 2023, our deposits declined approximately 9.5%, with a majority of that decline occurring on May 4th and May 5th after the news reports on the afternoon of May 3rd."
On this news, PacWest's stock price fell $1.38 per share, or 22.77%, to close at $4.68 per share on May 11, 2023.
Finally, on July 25, 2023, it was announced that PacWest had entered into an agreement to be purchased by Banc of California, Inc. ("Banc of California"). Under the terms of the agreement, PacWest stockholders were to receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
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SOURCE: Pomerantz LLP
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