Thursday 26 April 2018

Revealed: Why you need €10,000 minimum to buy shares in the great AIB flotation

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan
Charlie Weston

Charlie Weston

Members of the public will have to meet strict conditions to buy shares in AIB, in a flotation that is likely to be the largest in Europe this year.

These include a minimum investment amount of €10,000 and a requirement that you will have to be a client of a registered stockbroker, a person familiar with the upcoming flotation said.

The Irish Independent can reveal for the first time the full details of how small investors can buy into the multi-billion euro share offering.

The Government is likely to raise between €2.5bn and €3bn from the share sale, with the process likely to start this month or next.

This will go some way to repay the €20.8bn stumped up by taxpayers to rescue the bank. Already, some €6.6bn has been recouped by the Exchequer.

There is expected to be massive demand for the shares, as ordinary people have been buying them recently even though the bank is 99.9pc-owned by the State and shares rarely trade on the stock market.

This prompted Finance Minister Michael Noonan to previously plead with people not to buy shares until the company floats more of its stock.

The bank has retained a listing on the junior market of the Dublin Stock Exchange, even though it was effectively privatised during the crash in 2010.

Now Mr Noonan is about to push the button on the sale of millions of shares to retail buyers and institutional investors.

There will be no set limit on the overall amount of shares allocated to retail investors, unlike other flotations. The amount of shares going to punters will depend on demand.

About 25pc of the existing shares in the bank are being offered to institutional and retail investors. The exact timing of the shares sale will depend on market conditions.

Small investors who want to buy shares will have to have an account with a registered intermediary, or stockbroker.

The Government has signed up Goodbody, Davy and Investec to sell shares to small investors, with others expected to be added to the list.

However, investors will not be able to subscribe for shares through AIB branches.

Mr Noonan and his advisers in the National Treasury Management Agency, and a string of international investment banks, are keen to avoid a repeat of the Eircom debacle.

That led to around 500,000 retail investors losing money on the flotation.

This time, no bonus shares will be offered as part of the AIB flotation.

When both Eircom and Aer Lingus were floated, retail investors were offered bonus shares if they held the stock for a certain length of time. Many held Eircom shares too long, and ended up nursing losses.

There will be no discounts on the AIB share price offered to existing shareholders, AIB staff, or to the bank's directors, unlike other flotations.

Retail investors who buy shares will not be charged commission on the transactions, in a move to put them in the same position as institutional investors.

A person familiar with the flotation plans explained why conditions were being set for retail investors.

"We don't want to encourage people to come in and take a punt on this willy-nilly. On the other hand, we are conscious that taxpayers rescued the bank and so we want them to have an opportunity to take part in the flotation," they said.

Asked about the flotation plans, a spokesman for the Department of Finance said it was ready to proceed with a transaction if and when a final decision is taken to do so.

"As part of that process, we are now putting in place arrangements to facilitate private investors who might wish to take part in the transaction on the same terms as institutional investors," he said.

It encouraged private investors to take independent advice before making any investment decision.

Read more: AIB saves €1bn by freezing rises in defined benefit plan

Irish Independent

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