Cambridgeport Stock Offering Faces Public Scrutiny
IPOs (Initial Public Offerings) are usually the domain of Cambridge's start-up Internet companies. But Cambridgeport Bank is now joining the fray, but not without facing public scrutiny.
The normally uncontroversial move of the bank's conversion from a privately owned business to a publicly traded stock company was attacked by local residents during a meeting last night at City Hall.
City Councillor Jim Braude led the joint public hearing of the City Council's Housing Committee and Neighborhood and Longterm Planning Committee in an attempt to inform Cambridge residents of the conversion.
"We basically want to do the best we can to educate the community, especially the depositors, what their rights are in this conversion," Braude said. "We see it as necessary to shine some light on a deal hatched in darkness that will affect this community."
According to Braude, Cambridgeport Bank has been known for a strong commitment to the community, continually providing affordable housing lending to residents. But Braude is concerned that might change.
"Our concern is that when they are responsible to stock holders instead of depositors that the commitment may disappear," Braude says. "We want to make sure that they are still responsive to the community."
President and CEO of Cambridgeport Bank James B. Keegan '63 says he believes the fears are "ridiculous."
"The bank has a proud, proud tradition of working in the community," Keegan says. "Nothing will change our focus on the community or the valued relationship with depositors."
"Not only is affordable housing lending important to the community, but it's also good business," he adds.
But members of the Cambridge community as well as several council members say they do not feel the public was informed enough about the conversion.
Braude says depositors instead received a detailed prospectus outlining the plans for the conversion which he says no one could understand.
"What they got was a 194 page prospectus that Alan Dershowitz would have had a hard time understanding," Braude says.
Keegan disagrees, saying the bank did everything necessary to inform its depositors of the conversion.
The nearly 200-page prospectus included an eight page question and answer supplement. Posters informing bank patrons of the merger are also posted at every one of Cambridgeport's 10 locations in Massachusetts.
"It's about as clear as it could be," Keegan says.
Keegan also questioned why Braude believed the bank would hide the conversion.
"Why would we be secretive?" Keegan says. "We hope they buy the stock."
According to Keegan, the plan was approved at a public hearing on January 28.
"All concerns were addressed at that meeting," Keegan says.
He also says the conversion will allow the bank to increase its services to its depositors.
"We want to provide more and better services," Keegan says. "We need more capital to do that."
Since 1994, the Cambridgeport Bank has been organized under the Cambridgeport Mutual Holding Company. Earlier this year, however, the board of trustees of the company adopted a plan to convert to a publicly traded company to be named Port Financial Corp.
The bank is allowing depositors to purchase a minimum of 25 shares of stock at $10 apiece until 10 a.m. tomorrow. After the deadline, the sale of stock will be open to the community.
Cambridge resident Fred Reese criticized the minimum restriction requiring depositors to buy at least $250 worth of stock.
"I couldn't do it," Reese said. "I'm on a fixed income."
Members of the community also say they feared the sale of public stock would leave the bank open to takeovers.
"They are at the risk of being purchased by a larger bank or insurance company," said Cambridge resident Kathleen Kelly. "There is no guarantee the bank will not be taken over."
According to the prospectus, the board of directors and executive officers of the bank will only own 1.22 percent of the shares sold.
Keegan, however, dismisses fears of takeover, saying the bank will remain in the community in the same form as before.
"We are staying independent," he says.
No representatives from Cambridgeport Bank were present at the public meeting.