AIB shares in free fall ahead of reorganisation plans
Published 18/11/2015 | 16:16
AIB stock halved in price over the past two days, after it confirmed a stock reorganisation to replace every 250 of current shares with one new share.
The share consolidation does not affect the real value of the shares, but the Government has long warned that AIB stock was trading at an inflated valuation.
Even the latest plunge from 7.2 cents a share on Monday to 3.5 cents yesterday, leaves AIB with a notional valuation in excess of €18bn.
Just 0.2pc of AIB is owned by private shareholders. The rest is in State hands as a result of its €21bn bailout. Shareholders face further dilution as the Government plans to convert some of its preferred shares - a type of loan - into ordinary stock at 1.7 cents each.
Finance Minister Michael Noonan has repeatedly warned that AIB shares were overvalued.
“It appears to be becoming clearer to AIB’s shareholders that the market value ascribed to the shares has been inflated for some time,” Investec’s John Cronin said.
Meanwhile, investors are likely to seek a yield, or return, of 3.75pc to 4pc a year when AIB raises a 10 year junior bond planned in order to repay a share of its bailout.