So, AIB has returned to the main stock markets after 7-1/2 years. Why should I care?
The initial public offering (IPO) of AIB is an important milestone for the State as it seeks to recover the €20.8 billion taxpayers have pumped into the bank during the financial crisis to keep the lender afloat as it struggled with spiralling bad loans.
By selling an initial 28.8 per cent stake in AIB to stock market investors on Friday for a total of €3.4 billion, the State has now recovered a total of about €10.3 billion in cash from the bank. That includes a repayment of €6.7 billion of capital pumped into the lender, plus interest payments and fees for Government guarantees during the crisis.
Yes, particularly from large investors, though appetite from the general public was more muted as small investors needed to commit at least €10,000 to get a slice of the action. Overall, the investment banks that were running the stake sale on behalf of the Government received orders for about €13.5 billion of stock – four and a half times of the amount that was on offer?
Ordinary investors who put in an offer to buy up to €50,000 worth of stock will receive all that they sought and 53 per cent for amounts above that.
If there was such demand, why didn’t the Government sell more shares?
IPOs are typically oversubscribed by investors by a multiple of the stock on offer. The key in this case is to get the right types of investors on board. The Government had set its sights mainly on luring large pension funds and asset managers who intend to hold the stock for the long term and who would be the first port of call as it seeks to sell further shares in AIB in the future.
However, it would be important to also have some short-term orientated investors, such as hedge funds, on board as well, as they would be more inclined to actively trade the stock, ensuring that there’s enough supply and demand to create a proper market.
The IPO was priced overnight at €4.40 per share by the Government and its advisers, bang in the middle of a €3.90 to €4.90 range that had been outlined early last week…