The share price of First Security Group stock plunged 54.5 percent Friday in the first day of trading of the 60.7 million shares of FSG Bank stock sold in April to recapitalize Chattanooga's biggest independent bank.
But even though the share price for FSG fell in half Friday, the closing price of $2.06 per share was still a premium above the $1.50 issuance price for the new stock, which was restricted from trading prior to Friday.
The stock issue in April generated $91.1 million to help FSG Bank repay its federal TARP loan and shore up its balance sheet.
The new stock comprises 97 percent of the outstanding stock in FSG. But somewhat unexpectedly, the bank's legacy shareholders had not previously adjusted the trading price to be more in line with the April issuance price or FSG's book price of about $1.56 per share.
First Security announced late Thursday that the Securities and Exchange Commission had declared the stock effective to begin trading Friday. Previously, the new stock was restricted from any trades.
Trading of FSG stock on the Nasdaq exchange Friday was more than 150 times above the average trading volume for the stock prior to the new issuance as many of the investors who bought the stock at $1.50 per share in April cashed in Friday on the higher price. More than 6.5 million shares of FSG were traded Friday, compared with the three-month average volume this spring of about 43,000 shares a day.
FSG has previously announced that the old, legacy shareholders of FSG as of April 10 will have a right to buy two shares for each share they own at the new issuance price of $1.50 per share, up a total value of $5 million.
First Security Chief Financial Officer John Haddock said Friday the company anticipates that offering for legacy shareholders will begin in the next two to six weeks.