AIB sale plan puts spotlight on its shares
Hundreds of millions of euro are once again being flung around the financial markets, and the banking sector: if not with abandon then certainly with a sense of purpose.
This week's successful capital raise by Permanent TSB and the offer made to its rump of legacy small shareholders to buy into new stock automatically raises questions for holders of AIB stock. Advising anybody on an investment idea is a fool's errand, but it is worth setting out the things we do know about AIB shares.
First up there are lots of them - in the region of a half a trillion individual ordinary shares in total.
That is a legacy of the peculiar mechanisms used to bail out the bank. In the dark days of the crisis much of the €21bn of taxpayers' money shoved into AIB was in exchange for bank shares.
However, rather than buying shares from the then holders, the State demanded new shares and as a result squeezed the proportion of the bank owned by the previous holders to a fraction of 1pc.
Further cram-down may be on the way, as bailout loans convert into yet more shares.
In the meantime the small shareholders are still there, owning stock that trades on the markets at around 9 cents each.
In theory it makes AIB one of the most valuable banks in Europe.
That's the second thing we know - AIB shares are overvalued.
Because it is not one of the most valuable banks in Europe, AIB chairman Richard Pym noted yesterday that the shares trade at an around six times the value of its assets - and six time the value of many of its peers.
Indeed, he made it as clear as a bank officer can that the shares aren't worth a fraction of what they change hands for.
"I cannot think why a reasonable investor would think that this bank is worth six times its net assets," he said.
TD Shane Ross went further, saying the stock should be delisted from the Exchange in order to protect vulnerable investors from buying the shares.
Mr Pym said that was not something in the bank's power, but he didn't argue with the thinking.