Shares in the Spanish institution Bankia SA tumbled on today’s market, after the company released new shares onto the market. This morning Bankia offered 11.5 billion new shares to the market. This afternoon the firm’s value had dropped by 5% on its home index.
The huge jump in the amount of Bankia shares on the market is clearly a worry for investors, before today’s addition, there were around 20 million shares of the company on the market. Now there are close to 12 billion. In a company that has been facing severe problems for years, a change of that magnitude in any direction is bound to shake up investors.
The issuance of shares is part of a plan that is hoped to recapitalize Bankia, and set it up for a functional future. Investors don’t seem too impressed however. The new shares were given to retail investors in exchange for preferred shares they received in the early days of the European debt crisis. The shares took a 70% haircut on their value in the conversion.
About 68% of Bankia is owned by the Spanish government, while the rest is traded openly on the market. Spain gave the bank around 18 billion Euro last year in order to stave of collapse. That money was part of a 40 billion bailout that Spain was given through the European Union.
Those investors appear to have chosen to offload the shares en masse on today’s market, taking another large discount in their value for the privileged of no longer being associated with the Spanish lender. Bankia has tough days ahead, and investors are clearly not sure that the bank can make it through in one piece.
According to a New York Times piece on the bank’s latest offering, shares in Bankia are set to fall further if investment bank analysts are right about the stock. Target prices for the banks shares are lower than the 57 cents they closed at on today’s market. Nomura, for example, has set a price of 40 cents on the bank’s shares
Bankia shares opened on today’s market at 60 euro cents, and closed the day at 57 euro cents. Today’s drop in value complements the loss the shares have seen since the bank announced it was planning a new offering. In the last week shares in Bankia have fallen by more than 50%.