The terms of AIB’s upcoming €1.2 billion buyback of shares held by the Government – as it hastens an exit from the bank’s shareholder register – are raising questions from some other big shareholders, in light of the stock’s recent pullback, according to market sources.
With good reason.
AIB, led by chief executive Colin Hunt, announced earlier this week that the shares would be repurchased, subject to shareholder approval at the bank’s annual general meeting (agm) in a month’s time, at a minimum of €6.26. It would reduce taxpayers’ holding in the bank, which required a €20.8 billion bailout during the financial crisis, to about 3 per cent.
The floor price was based on the stock’s volume-weighted average price – or VWAP, as it is known in the stock market – for the five business days to Tuesday of last week, less almost 37 cent to account for a planned dividend on AIB’s profit for 2024.
If the average VWAP is higher than €6.26 in the five days before the shareholder meeting on May 1st, the buyback price can be adjusted upwards to that level.
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The problem for other shareholders – who, let’s not forget, are not being offered a chance to sell into the buyback, is that AIB’s shares have fallen over the past week or so to as low as €5.78.
The shares had peaked at €7.26 early last month, the highest levels since the Government first sold shares in the bank in 2017, after the bank reported better-than-expected full year results.
The subsequent pullback has come as some investors locked in profits (US investment giant BlackRock last week sold more than a 3 per cent stake on the market, reducing its holding to about 8.5 per cent), while others fretted about how US president Donald Trump’s trade war would affect the Irish economy.
Concerns about the pace of new Irish house building and its effect on mortgage growth have also tempered enthusiasm towards Irish banks.
Will a head of steam build up among institutional and small shareholders alike on the terms of the repurchase if AIB’s shares continue their retreat in advance of the agm? Or will they just suck it up for the sake of the bigger objective of seeing the Government off the pitch?
