• Price may fall further as stock consolidates, analyst says
  • Lender plans to consolidate stock on 1-for-250 basis

Allied Irish Banks Plc shares may continue to fall after the bank said it’s in talks with the government to restructure its capital base in an accord valuing the stock at about a quarter of the current stock price.

The plan would price the shares at 1.7 euro cents each, the company said in a statement on Tuesday. AIB, which has a free float of 0.2 percent after the state seized it in 2010, traded at 6.9 cents in Dublin, down 4.2 percent at 9.46 a.m.

Bank's shares drop
Bank's shares drop

Finance Minister Michael Noonan has repeatedly warned that AIB’s 0.2 percent of tradeable stock is valued at a fraction of its market price, as the number of shares in issue ballooned from 918 million to 523 billion amid multiple bailouts since 2009. The Dublin-based bank said it plans to consolidate stock on a 1-for-250 basis.

The 1.7-cent valuation is the basis under which the government plans to convert some of its 3.5 billion euros of preferred stock in the bank into equity. This is part of a blueprint to simplify the capital structure before the state begins to sell its 99.8 percent stake as early as next year.

“The fall-off in the share price is unsurprising as the overvalued, low equity float has been a well-flagged unfortunate feature of AIB’s capital structure for some time,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. “The price should continue to fall through the consolidation and preference-share conversion.”

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