Drew Field
Direct Public Offerings
Case StudiesCalifornia Federal Bank

California Federal Bank

Conversion of this mutual savings bank in 1983 became the largest initial public offering in history, with the sole exception of Ford Motor Company. The total offering was $375 million. We sold $45 million in 45 days through a direct offering to the bank's customers. The balance was then sold by an underwriting syndicate managed by four large Wall Street brokerage firms.

We started out to use direct marketing media to announce the offering in the Los Angeles area, where 80% of the bank's customers lived. Print, radio and television ads were all prepared, with marketing experts and lawyers teaming up to make them as effective as possible. Two days before the campaign was to begin, management was warned that any advertising could trigger an "investigation" by the SEC, causing a delay in the underwritten portion of the offering. The consequences of that, management was told, could be to miss "the window of opportunity" presented by the institutional investors "appetite" for savings bank shares. The announcement phase of the Direct Public Offering was canceled. (The project manager, Lloyd Dunn, formerly the bank's general counsel, later wrote his belief that the direct offering could have sold half the total offering if the announcement program had been used.)

All other efforts were concentrated on helping the customers who expressed interest, getting in their share subscriptions before the deadline. Several dinner training meetings were held, to which all the employees were invited. Everyone participated in small-group training sessions. A telephone room was staffed with constant training and supervision. Television monitors and VCRs were placed in every branch, with a continuous message playing about the offering. Tellers were trained to mention the offering to customers and direct them to where they could get more information. Cookie-and-coffee and wine-and-cheese gatherings (some with decorations and a live band) were held for customers to come with their questions.

California Federal Bank was one of the survivors of the industry shakeout that was to follow. As of the end of 1996, it was to be merged with another large institution.