Shares of Banc of California, Inc. (NYSE:BANC) are trading higher by about 22% as of 2:30 p.m. EDT as the company took steps to mitigate concerns about the bank's alleged relationship with serial fraudster Jason Galanis. Shares dropped 29% yesterday on the publication of a short report that outlined potential links between Galanis and the bank.
Last night, Banc of California put out a press release in response to the short report. The release noted that its "Disinterested Directors" initiated an immediate investigation into links between Galanis and the bank, and refuted one claim of a direct link between Galanis and the company.
This morning, Banc of California released earnings a day earlier than previously scheduled, announcing record net income and deposit growth. It also increased its full-year earnings guidance to "at least $1.85 per share," up from $1.60 per share.
In the same 8-K filing with the SEC, the bank announced that its board of directors approved a share buyback program that would authorize the company to buy back up to 10% of its currently outstanding shares over the next 12 months. In an exhibit, the bank included a letter to SeekingAlpha, calling for the removal of yesterday's blog post that alleged ties between the bank and Galanis.
The bank added additional detail about its investigation in its prepared remarks on its earnings conference call, noting that management had advised the board of directors in 2015 about Galanis' indictment, and that it retained outside counsel for an investigation that continued for more than a year. The bank confirmed that there was no ownership or influence link between Galanis and the bank during that previous investigation.
The company didn't take any further questions about Galanis, citing the fact it believed the short report was libel per se and that further discussion could impact its ability to seek legal recourse. Executives also stopped short of naming the "disinterested directors" involved in the internal investigation that began yesterday. Instead, interest was diverted to its earnings for the third quarter.
This is likely only the beginning of a very public, back-and-forth conversation between critics and company executives, as these matters typically evolve over the course of months, if not years. Potential ties to Galanis are just one of many issues brought up in the short-seller's blog post.
The only certain development in the last day is that Banc of California's explosive asset growth may slow. Bank officials pointed out that the bank may sell certain assets on its balance sheet, use capital to pay larger dividends or repurchase shares, or all of the above.
Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.