Long-suffering shareholders in Bankia have been warned that they stand to suffer a “significant dilution” once the troubled Spanish lender is fully recapitalised, confirming fears that retail investors who bought into the heavily-marketed initial public offering two years ago may be wiped out almost entirely.
The warning came in a statement from Spain’s Fund for Orderly Bank Restructuring (Frob) on Thursday, and followed a decision by the country’s stock market regulator to briefly suspend trading in Bankia shares.
The suspension was prompted by reports in the Spanish press suggesting that the Frob – which is in the process of calculating the bank’s final capital needs – is set to value Bankia shares at just €0.01. The Frob did not confirm the report, saying it has yet to complete its assessment.
However, it cautioned that the process would lead to an “important reduction” in the nominal value of Bankia shares, implying a heavy dilution of current shareholders.
The suspension was lifted only hours after the market opened, but Bankia shares fell more than 12 per cent to €0.41 on Thursday, close to their all-time low.
Bankia became the symbol of Spain’s banking crisis last year, when it revealed big losses and a gaping capital shortfall that forced the government to carry out an emergency bailout. The bank’s failure has sparked particular fury among the 350,000 retail investors who bought into Bankia’s IPO in 2011 and saw the value of their shares plummet less than a year later.
The closing price of Bankia shares on Wednesday was €0.47. When the lender was floated in 2011, the stock was valued at €3.75.
According to a preliminary calculation made by the Frob in December, Bankia was estimated to have a negative economic value of €4.15bn. Banco Financiero y de Ahorros, the lender’s unlisted parent group, was valued at a negative €10.44bn.
Frob officials explained at the time that these estimations were based on a calculation combining the current state of the groups’ balance sheet with their ability to generate earnings in the future. The assessment was supposed to form the basis for a final evaluation of Bankia’s capital needs and the corresponding loss that would be imposed on shareholders.