How will the merger affect HomeStreet's share price and valuation?

Impact on Share Price & Valuation

The regulatory clear‑cut for the all‑stock merger removes the biggest execution risk, so the market will now price in the transaction’s economics rather than uncertainty. HomeStreet’s (HMST) share price is likely to move toward the merger‑derived exchange ratio (which has been disclosed in the original filing) plus a modest “completion premium” that investors typically demand for the added execution risk that still remains (e.g., integration, cultural fit). Given the neutral‑to‑slightly‑positive sentiment score (40) and the fact that the deal is now “all‑clear,” we can expect a short‑term rally of roughly 5‑8 % from current levels, with the upside capped near the implied value of the share‑for‑share conversion (approximately the pre‑announcement premium already embedded in the offer).

Fundamentally, the combined entity will have a larger deposit base, a broader geographic footprint (Northern California & Seattle), and improved scale‑driven cost efficiencies. HomeStreet’s book‑value per share should rise as the transaction is accounted for on a purchase‑method basis, and earnings per share (EPS) is projected to increase after synergies are realized. Consequently, valuation multiples (P/B, P/E) are expected to compress toward the peer‑group averages for regional banks (P/B ~1.2‑1.5×, P/E ~10‑12×). Investors who are comfortable with the integration timeline may consider buying on pull‑backs to the lower end of the implied range, while risk‑averse traders could look to capture the immediate post‑approval bounce and set tight profit targets (≈4‑5 % above entry) with stop‑losses just below the pre‑announcement price.