Bank of Ireland shareholders were waking this morning to find their holding has been considerably diluted after the Government increased its stake to 16pc.
Analysts have said that the prospect of a majority State ownership of Ireland's oldest bank is now much closer.
The last-minute move by Finance Minister Brian Lenihan, to take €250m worth of its ordinary shares in lieu of a cash payment, comes as a further blow to investors.
Shareholders at the bank's EGM in May last year expressed their anger and disappointment at the bank's performance.
One angry shareholder threw an egg at chairman Dermot Gleeson shortly after the meeting started.
The European Commission has banned Bank of Ireland and Allied Irish Banks (AIB) from paying dividends on shares and interest payments on some debt while it investigates their restructuring plans.
But as a payment was due on Monday, the EU said that the payment may be made in ordinary shares.
Last week, the National Treasury Management Agency (NTMA) chief executive, John Corrigan, advised the Public Accounts Committee that cash was "preferable" to shares and that it was better to be "patient".
However, the Department of Finance have decided to press ahead and accept a 15.7pc ordinary shareholding from Monday.
"This ensures that taxpayers are remunerated in a timely fashion for their investment in the bank," Mr Lenihan said in a statement.
"In his discussions with the bank the minister will ensure that the taxpayer is appropriately remunerated for any investment in the bank and issues in relation to coupon payments and preference shares will be determined in the context of the Bank of Ireland restructuring plan."
It is the first time the State has taken direct shares in the country's banks -- before now it took €3.5bn in preference shares.
Under the bank's own rules, the shares had to be paid over regardless of the NTMA's position. When this fresh batch of shares is added to the warrants giving it the right to purchase up to 25pc of the shares, it gives the State an effective 40pc stake in the Bank of Ireland.
The Bank of Ireland issued a statement which said that it was "actively exploring a range of options" on funding and that it wanted the State's investment to be at a level that would facilitate "possible access to private capital sources".
The bank's shares have tumbled by 93pc over three years from €18.65 to trading at €1.26 by close of the Iseq on Friday.
Meanwhile, former Defence Minister Willie O'Dea has contradicted Taoiseach Brian Cowen's account of his resignation and admitted that the Green Party forced his departure.
Mr Cowen said that there was no pressure from the coalition partners for Mr O'Dea to step down and that he had stepped down of his own accord.
However, it has now been claimed that the Greens threatened to withdraw from the Government if Mr O'Dea's resignation hadn't been tendered. "I decided to resign after speaking to the Taoiseach and it became clear that the Green Party would no longer support the Government if I were to stay in the Government," said Mr O'Dea.