Santander Begins the Biggest Monetary Share Capital Increase Operation in Spain.
Written by Allan on December 1st, 2008The biggest share capital increase operation in the history of the Spanish Stock Market is underway. Santander will issue new shares to the value of 7,200m€ which will be quoted on the Stock Market from the 4th December. The dilution effect of the operation on the earnings per share is not to the market’s liking and the value of Santander shares has dropped by 18.5% in 3 trading sessions.
From today and until the 27th November, Santander shareholders have the option of taking part in the share capital increase operation as preferential investors. The bank will issue 1,600 million new shares and those wishing to participate will be able to buy one new share for four old ones which have a discounted price of 4.5€. Those shareholders who decide not to participate will be able to sell their share rights on the market.
From today until 27th November, Santander’s shares and their share rights will have separate quotations. So, taking into account Santander’s shares closed yesterday at 6.8€, today they will start off the session at 6.34€, since the theoretical value, going on current prices of share rights of 0.46€, will automatically be deducted. The value of both share and share rights may rise or fall during the application period.
Santander hereby sets in motion the biggest share capital increase operation in the history of the Spanish Stock Market. In order to discover an operation of similar dimensions in which the issuer also paid in cash, we have to go back to Repsol´s share capital increase operation in July 1999 when the total raised amounted to 4,646m€.
The next biggest cash operations include the 3,447.8m€ which Mapfre raised in March 2007, the 3,374m€ by Iberdrola in June 2007 or the 2,9999.9m€ by BBVA in November 2006.
Likewise, the biggest non-monetary share capital increase operations in the history of the Stock Market have also been headed by Santander. The most important being in 1999 during the merger with Central Hispano when 14,271.2m€ were issued, while the second biggest occurred in November 2004 when 13,358m€ were raised to fund the purchase of Abbey.
Santander is back in the thick of it and this time with a guaranteed operation. The President, Emilio Botín, said yesterday that things were going extremely well and that the operation was a good thing for the bank and the shareholders.
The market, for the moment, has not taken it well and in three days the share has fallen 18% in value. Nicolas Lopez, Analytical Director at M&G Securities said “The price, more or less reflects the dilution effect on earnings per share - estimated to be between 15% - 20% - however the market has taken three days to take it in, so it is not known if, to a certain extent, this was expected or if it is due to the current situation”.
Other experts, including David Navarro of Inversis Bank, remind us that part of the fall is also an indication of the surprise which the news caused after the bank’s management team insisted there was no need to increase share capital at the end of October “The good thing is that we don’t foresee more Santander share capital increase operations.”