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THE GOVENRMENT has concluded the sale of over 10.5 billion shares in Bank of Ireland – a move which has saved the state around €1.05 billion.
The 10.51 billion shares were sold, at a price of 10c apiece, by the National Pension Reserve Fund – which manages shareholdings on the State’s behalf – to a consortium of North American investors.
The consortium is led by Fairfax Financial Holding, a Canadian investment firm, and also includes the investment vehicle of well-known investor Wilbur Ross who had previously sought to buy the EBS Building Society.
The sale of the shares means the State’s shareholding in Bank of Ireland – prior to the latest round of stress tests, following which recapitalisation has not yet occurred – is reduced from 36 per cent to just over 15 per cent.
Finance minister Michael Noonan said the sale “reaffirms the Government’s banking policy” as announced by the last round of stress tests, which will bring the State’s total banking investment to €70bn.
“It further underlines how we are successfully breaking the link between bank risk and the sovereign.”
In the last round of stress tests, Bank of Ireland was deemed to require a further €5.2bn in public recapitalisation – though this bill has since been lessened by various burden-sharing exercises with the bank’s bondholders.
Bank of Ireland’s shares are currently trading at precisely 10c on the Irish Stock Exchange.
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How much did they buy the shares at?
10Cent
In 2009 Irish gov. (FF) gave e3.5B of tax payers money in return for 25% of the bank (BoI)…….. the article above suggests 21% was sold at e1.05B …… this seems to infer taxpayer (via FF) paid e2.9B (approx) for that 21%! net loss to the exchequer e1.8B….. jeez I hope this rapid calculatoin is wrong!!!
@William – That’s very possible. Whenever the State issues a recapitalisation, the bank issues new shares at whatever price the market demanded at the day.
Let’s say, for example, that the State decides it needs to give the bank €1bn. If the shares in the bank are priced at €1 each at that time, the bank will issue exactly 1,000,000,000 new shares which are immediately sold directly to the State. The State gets a whole packet of shares in return for its investment, and the bank gets €1bn which it can use to sort out its affairs.
If the market value of those shares continues to plummet – and it almost certainly will, given how the new investment dilutes the value of the other shares – then this investment begins to lose money. If the State buys shares for €1 each and the following day shares are only worth 98c, then the state’s investment is already down to €980m – meaning a theoretical €20m loss for the government. So, if the State invested in 2009 and sold some of those shares today, you can be 99.9% certain that it’s made a loss on that investment given how banking shares will have suffered.
On the other hand, the reason this might be portrayed as good news is because – being completely objective – there is absolutely no hope, for many years to come, of bank shares recovering the value they used to. It was fundamentally unrealistic to expect the State to make a profit on the shares, unless it hung onto them for decades and decades – and so the State is faced with two options: either wait for decades, and hope for a turnaround, or accept the loss and at least get some cash in the door to lessen its overall share in the banking sector. Given that the current government has a serious job on its hands of trying to raise new cash in the short-term, it’s relatively understandable that it would choose to sacrifice a potential (and not guaranteed) long-term profit in exchange for a quick buck that also reduces its role in a commercial industry.
Il be looking forward to my share of that 16% in the post, as will most Irish People…eh? What you mean we won’t see it? "is it because I’m Irish"
Restrained myself with difficulty from retching when I heard the government welcomed the deal. Worth bearing in mind that thousands of citizens lost their pension pots when BOI shares tanked, despite the repeated official statements that the bank was as solid as can be. The only reason the sale went ahead is because the dumb Irish taxpayer, courtesy of Cowen-Lenihan policies, has underwritten its recapitalization and debts. Taxpayers, small business and their families are in reality indentured servants to bank debts. If there is icing on the cake, it won’t be shared with the citizens. When many people out the window, they must wonder is it feudal Ireland outside.
This sale of shares in BOI is another wasteful scam by an Irish government. Who is advising these people. Thanks to the Irish taxpayer BOI is now one of the best funded banks in the EU. Mark my words these shares are gong to be sold on at a huge profit.
They are for sale to anybody on the stock exchange, might be worth a punt
Surely it would have made far more sense to wait until the price of BOI shares had risen somewhat before flooding the market with over ten billion shares! They could also have been released to the market in smaller amounts so as not to artificially deflate the return to the government and ultimately the tax-payer. Jaysus, here was me thinking we might have finally started to learn…
“It further underlines how we are successfully breaking the link between bank risk and the sovereign.”
how in gods name dose this help when we are still going to shove another 6bil into the dead anglo
Why Not Sell the rest of Michael while you are at it, instead of wasting more of our money on ineffective self serving Fairy Story Solutions?
“It further underlines how we are successfully breaking the link between bank risk and the sovereign.”
No it doesn’t. There’s no such thing as banking risk anymore. If BOI looks like going belly up again next week then the state will just bail them out again and we all know it.
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