Retail Investors Snub Barclays Offer

123jump.com Staff
19 Jul, 2008
New York City

Retail investors snubbed recent Barclays offering at 282 pence and only 20% of the existing holders participated in the offering. The stock has since falln another 20%. Sovereign wealth funds of Qatar and Singapore have agreed to invest in the fund and institutional investors in China and Japan participated in the offering.

[R]10:00 AM New York—Barclays Plc secures £4.5 billion from investors, 81% of ordinary shareholders snub the rights offering.[/R]

Barclays plc, Britain''s fourth largest bank said today it raised £4.5 billion from investors to shore up its capital base, but ordinary shareholders elected to buy only a fifth of the rights issue shares. Institutional investors may not be happy with Barclays trade nearly 20% lower than its rights offering price.

The bulk of shares were sold to investors in China, Japan and Middle East after 81% of Barclays'' ordinary shareholders snubbed the offer.

Barclays said shareholders bought only £753 million worth of shares from a possible £4 billion availed to them. Shareholders paid 282 pence per share.

Two weeks ago the bank floated 1,576 million shares, seeking to secure £4.5 billion from investors. Barclays had repeatedly denied before the offering that it needed additional cash from shareholders.

Of the shares on offer, sovereign wealth funds in the Middle East acquired majority stakes. The Qatar Investment Authority, the state-owned investment vehicle became Barclays'' one of the largest shareholder after buying £1.7 billion worth of shares or about 6% of the bank''s issued capital.

Barclays said a separate Qatari company called Challenger where Sheikh Hamad Bin Jassim Bin Jabr alThani, the Qatar premier owns controlling stake, bought new shares worth £533 million or about 2% of the bank.

Sumitomo Mitsui Banking Corporation, the giant Japanese bank, now holds a 2.1% stake in Barclays after investing £500 million in the offer.

Other existing shareholders, including China Development Bank retained its 3% stake and Temasek, an investment firm from Singapore, raised its equity holding to 3%. The two companies spent between the £336 million buying new shares.

The new shares will start trading on July 22. Barclays is the latest British bank to seek additional equity from investors after the bank permitted risky investment in low quality mortgage loans.

HBOS will find out later today whether its shareholders have backed a plan to raise £4 billion to shore up its finances, which in the current market environment appear challenging.

Royal Bank of Scotland Group raised about £12 billion while HBOS is looking to raise £4 billion and meet the regulatory capital requirements.

Morgan Stanley had also hoped the $5 billion sell of 9.9% of its shareholding to China Investment Corp at the peak of the credit crisis earlier this year would help it strengthen its capital base.

Barclays said proceeds of the offer would ""strengthen its capital base and provide additional financial resources to allow Barclays to capture opportunities for growth.""

""Through our capital raising, we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification,"" Barclays chief executive John Varley earlier this month.

On a pro-forma basis, Barclays estimates that it would have reported a Tier 1 ratio of 8.8% and an equity tier one ratio of 6.3% as at 31 December 2007, taking into account the latest fundraising above the bank target of 7.25% and 5.25% respectively.

Barclays has incurred losses from mortgage backed investments, devalued by the slump in the US housing market. The bank has written off about £2.6 billion since the start of the credit crisis. The crisis has cost global financial institutions more than $450 billion to date and credit market losses may reach as high as $1.2 trillion.

Shares of Barclays fell 6.62% or 17.25 pence to 243.5 pence in early London trading Friday. The stock has lost 25% of its value since the rights issue was announced more than a fortnight ago. Over the past 52 weeks, Barclays'' shares have traded in the range 238.750 pence and 734.789 pence.