Business Irish

Sunday 17 November 2019

Will shareholders sue BoI?

THE case being brought by a raft of institutions against RBS over its 2008 rights issue could have major implications for Bank of Ireland, which sold new shares to investors in 2010 that have since lost over 80 per cent of their value.

A group of 91 institutional investors who bought shares in the April 2008 RBS rights issue, which raised £12bn (€15bn), are considering suing the bank for £3.3bn.

The September 2008 financial meltdown exposed the full extent of the problems at the bank and the subsequent bailout left the British government with an 83 per cent stake. The RBS share price is now 90 per cent lower than it was at the time of the rights issue. Not surprisingly, the investors who ponied up in April 2008 are mad as hell.

So what has all of this got to do with Bank of Ireland? Potentially quite a lot.

In May 2010 it unveiled its own three-for-two rights issue to raise a gross €1.85bn and an institutional placing which raised a further €500m. This was part of a complex package which also saw a large chunk of the government's preference shares converted into ordinary shares.

The rights and placing was priced at 55c a share. A year later Bank of Ireland was forced to announce a fresh rights issue at just 10c a share.

The share price on Friday was just 9.3c, which means subscribers to the May 2010 rights issue and placing have lost over 80 per cent of their money. Such shareholders might well be tempted to follow the example of their RBS counterparts.

Sunday Indo Business

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