These are all the key points you need to know about the AIB share sale
The government is almost ready to offload 25% of the bailed-out bank.
YESTERDAY EVENING THE government set out its range for exactly how much it thinks shares in bailed-out bank AIB are worth.
An initial public offering (IPO) is just around the corner, which will see the bank start to be returned to private hands after spending about seven years in state ownership.
So what do you need to know about the IPO? Here are the key points:
How much of the bank is being sold?
The state owns 99.8% of shares in AIB following the bailout. It’s expected to sell 25% of those in the IPO, and then continue selling off shares in the bank over the coming years.
How much will the state get?
It was announced yesterday that AIB stock will be priced at between €3.90 and €4.90 per ordinary share. This would give the bank a market capitalisation of between €10.6 billion and €13.3 billion.
This means that the state could net between €2.7 billion and €3.3 billion from selling a 25% stake, depending on investors’ appetite.
If demand for the shares is strong, investment banks and brokers working on the deal also have the option to buy a further 3.75% from the state and sell it on to the markets.
The AIB logo
The windfall will go some way towards repaying the €21 billion taxpayers put into the bank during the bailout. AIB says it has already repaid about €7 billion through the state in a variety of ways including dividends and redeeming preference shares.
How much does the IPO cost?
The prospectus published yesterday to announce the IPO also revealed how much the process is costing the state.
According to the document, the state will pay advisers working on the sale about €41 million in fees for marketing the bank to investors in an effort to make the IPO a success.
Can the government do whatever it wants with the money?
There has been a long-running row about whether the government can use the money raised from the IPO as it pleases.
Opposition politicians say that the government should ignore or try to change EU rules which say that the money has to be spent on debt so the cash can be spent on badly-need infrastructure.
However, the government says it has no choice in the matter, and has to use the money to pay down debt under the rules.
Finance Minister Michael Noonan
Can ‘normal’ people buy AIB shares?
Some people have wondered if average punters can pick up some bank shares. They can, but only if they have plenty of spare cash down the sofa.
Small retail investors can buy into the bank, but they will need a minimum of €10,000 available to do so. They will also need to be signed up to a stockbroker.
But investors are being advised to think seriously before stumping up thousands to get in on the action. Aside from the historical problems faced by Irish banks, many small investors already appear to have been burned.
Although only a tiny amount of the bank’s shares are currently traded on the market, retail investors were buying in ahead of the IPO. The value of the bank’s small number of shares issued shot up from about €5 to over €8 in the last month.
The shares plunged by 28%, falling to €4.65, in early trading on Dublin’s junior market this morning as retail investors sold out.
When is the IPO finally going ahead?
The final pricing of the shares is set to be announced within the next 10 days. It’s expected that the shares will be traded on the stock markets near the end of the month.
