Allied Irish Banks Shares Plunge as Investors Face SqueezeJoe Brennan
Allied Irish Banks Plc plunged in Dublin trading as the lender prepares to cut the number of shares it has in issue by more than 99 percent in an reorganization of its capital structure before a government stake sale next year.
Shares in AIB, which has a free float of 0.2 percent after the state seized the bank in 2010, plunged as much as 46 percent to 3.1 cents in Dublin trading on Wednesday. They were trading down 38 percent at 3.5 cents at 12:34 p.m., bringing their decline since Tuesday morning to 51 percent.
Finance Minister Michael Noonan has repeatedly warned in the past year that AIB’s tradable stock is overvalued, as the number of shares in issue ballooned to 523 billion amid multiple bailouts since 2009. The bank said on Tuesday it plans to consolidate stock on a 1-for-250 basis, and and allow the government to convert some of its preferred shares into ordinary stock at 1.7 cents each.
“It appears to be becoming clearer to AIB’s shareholders that the market value ascribed to the shares has been inflated for some time,” said John Cronin, an analyst with Investec Plc in Dublin.
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.