Portugal’s troubled Banco Espirito Santo SA (ELI:BES) is suffering a lot of hurt these days. Based on filings from the Portuguese regulatory website CMVM, BES has now said goodbye to one of its most touted shareholders, Seth Klarman’s Baupost Group.
Baupost subsidiary Baros S.a.r.l. acquired 2.15% of BES
Baros S.a.r.l., a wholly owned subsidiary of Baupost Group, acquired 2.15% of BES or 120,725,000 shares, from a combination of Baupost partnerships on July 28.
Two days later, on July 31st, Baros had sold the entire stake of 120.7 million shares, thus effectively ending its short lived affair with BES. On July 30, the bank reported a whopping loss of €3.49 billion in losses and the shares plunged more than 60% over the next two days. Perhaps Baupost saved itself from some of these steep losses with its quick sale.
Here is a brief snapshot of how Baros S.a.r.l links to Baupost Group. The entire share capital of Baros S.a.r.l. is owned by Baros Holdings LLC. Then 100% of Baros S.a.r.l.’s share capital is held in the various LPs of Baupost Group. Baros Management manages Baros Holdings and is also a director of Baros S.a.r.l. Baros Management is in turn managed by Baupost Group.
It seems, however, that there are still 7.4 million shares lying around somewhere as Baupost Group originally held 127.4 million shares. It is not only Baupost that has been slashing holdings in Banco Espirito Santo SA (ELI:BES), Goldman Sachs also cut its holding to less than 2%.
Baupost had increased holding in early July
On July 10, news broke that Baupost had increased its position in the Portuguese bank by 48 million shares. This update served to tell the world that one of the most successful value investors has been betting on the beleaguered financial institution, so all is well. Baupost increased its stake in BES to 2.27% or of the bank’s voting rights and share capital (127.4 million shares) on July 3rd.
Woes of the Espirito Santo family
Banco Espirito Santo SA (ELI:BES)’s stock was rocked over the summer after news broke that major financial irregularities were uncovered in the Espirito Santo family which owns the bank through Espírito Santo International. The announcement that Banco Espirito will receive €6 billion from EU’s bailout fund was bad news for investors who held bond and equity positions in one of Portugal’s largest lenders. EU rules demand that any value of securities issued by an institution be wiped out in case it gets bailed out by the government. Banco Espirito will soon be delisted from Lisbon stock market, effectively making its stock worthless. Novo Banco was formed by Bank of Portugal early this month to take on the healthier assets of BES as part of its bailout package.
The Banco Espirito Santo SA (ELI:BES) disaster has resulted in losses for numerous hedge funds, even those who did not hold a position in the bank directly.