Bankia’s brand new shareholders might feel like chumps after bailout talk. So they should
AFTER all the fanfare that accompanied Bankia’s €3.3bn (£2.6bn) float in Spain last summer, talk of a bailout for the lender less than 10 months later could well leave its new investors feeling like chumps.
And so they should. Investment bankers working on the float last year made a big song and dance about how vital it was to get the deal done, to help save the euro by proving it was still possible for a bank to raise private cash – mostly from ill-informed retail investors.
But anyone who believed we could see the bottom of Spain’s property crash in 2011 and who thought buying stock in a bank led by a former minister was a vote of confidence in private capital is paying the price. Bankia stock is down 36 per cent since the float.
As City A.M. reported at the time, many European banks spent last year hawking billions in junk property assets, some at knock-down 75 per cent discounts, and yet most estimates put the deleveraging still to come in the trillions. But even as talk of a bailout builds, Bankia’s website is advertising a “new and exclusive property offer” to shareholders willing to put yet more money into its real estate assets.
Spain’s politicians should have realised the first time that throwing good money after bad solves nothing. A problem shared, in this case, is a problem spread.