Why PacWest Bancorp Shares Are Nosediving Premarket Thursday

PacWest Bancorp. PACW shares are on a freefall in premarket trading amid speculation that the Los Angeles, California-based regional bank could be the next domino to fall.

PacWest's shares tumbled 39.10% to $3.91 in premarket trading on Thursday. The fall was not as worse as the 50% drop in after-hours trading on Wednesday.

The stock tumbled late Wednesday when Bloomberg reported that the bank has been exploring strategic alternatives. A sale or breakup or a capital raise could be on the horizon, the report said. It also flagged a lack of interest among potential buyers due to the big loan losses the bank was saddled with.

Early Thursday, PacWest issued a clarification on the report and said the evaluation of strategic options is a normal practice and that it has been approached by several potential partners and investors. Discussions are ongoing, it added.

The bank also went on to assuage investor concerns by saying a planned sale of strategic assets will boost its CET1 ratio to over 10%. It also clarified that it has not seen any extraordinary deposit outflow since First Republic's sale and that its insured deposits as a percent of the total have seen an uptick.

Meanwhile, Bill Ackman took to Twitter to call upon the Federal Deposit Insurance Corporation to announce a system-wide deposit guarantee regime.

“Banking is a confidence game,” Ackman said, adding that “at this rate, no regional bank can survive bad news or bad data, as a stock price plunge inevitably follows.”

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