HBOS is to reveal that as few as ten per cent of shareholders took part in the banking giant’s £4 billion rights issue.
According to one report, the low take-up would represent one of the City’s most disastrous fund raising exercises – potentially saddling its underwriters with around £3.6 billion worth of shares.
It would compare with BP’s £7 billion share issue scheme that went ahead after the stock market crash of October 1987, leaving big City backers owning most of the stock.
Many of HBOS’s two million smaller investors – gained when the former Halifax building society demutualised in 1997 and who now own around 27 per cent of the bank – are thought to have turned their back on the rights issue.
The scheme was launched back in April to help strengthen the group’s balance sheet, when HBOS share price at the time was around 500p mark. Shareholders were offered two shares at the heavily-discounted price of 275p for every five held.
But since then, the bank’s stock has plunged in value amid fears of further big write-downs in the sector and general economic gloom.
Shares in HBOS, which is Britain’s biggest mortgage lender, actually fell below Friday’s rights issue deadline, severely dampening the appetite of smaller investors to buy the new shares. Any new shares not taken by the bank’s existing investors will be taken up by the underwriters, Morgan Stanley and Dresdner.
They are likely to spend several days trying to place them with big City investors, accepting any taken up on to their own balance sheets until they can sell them for a profit.
A ten per cent take-up for HBOS’s rights issue would be nearly half that for Barclays’ recent £4.5 billion share placing.