A number of AIB directors plan to buy stock in the bank after it floats later this month, having agreed not to participate in the initial share sale to avoid any perceived conflicts of interest, according to informed sources.
International fund managers planning to buy into the State's sale of up to a 28.8 per cent stake in AIB would expect directors, including chief executive Bernard Byrne, chief financial officer Mark Bourke and chairman Richard Pym, to buy shares soon after the initial public offering (IPO).
This is especially the case as AIB warned in an IPO document published this week that an ongoing ban on bonuses and share incentives for executives, as a result of its bailout, restricts it from “aligning” their interests with investors. It may also lead to senior management losses, it said.
A spokeswoman for the bank declined to comment.
The 687-page prospectus said that while individuals can buy into the IPO, provided they commit at least €10,000, AIB’s board decided directors should not participate “to avoid any potential for a conflict of interest to arise”. Mr Byrne and Mr Bourke began a deal roadshow in Dublin on Wednesday, with three AIB teams and their advisers set to disperse globally in the coming days to promote the transaction.
Senior executives
Certain “senior executives” below the board may seek to participate in the stock sale, which the Government expects to price at between €3.90 and €4.90 per share and value AIB at up to €13.3 billion, according to the prospectus.
“The number of ordinary shares applied for by each senior executive will be published in the pricing statement,” it said. “The senior executives will not receive any priority allocation or benefit from any terms more favourable to those applicable to all retail investors.”
Would-be small investors who don’t already have an account with one of eight stockbroking firms involved have until the close of business on Friday to open one. Meanwhile, investment banks and brokers working on the deal revealed on Tuesday evening that they had already secured enough demand from potential large and private investors to cover the entire stake being sold.
However, the ultimate success of the IPO, expected to price around June 23rd, will depend on the extent to which the share sale has been oversubscribed and the type of investors it attracts.
Price plunge
Shares in AIB plunged by as much as 28.5 per cent per cent on the junior stock market in Dublin as investors digested the price at which the State intends to sell stock in the bank.
Many small, speculative investors had ignored repeated warnings from Minister for Finance Michael Noonan in recent years that AIB's stock – of which only 0.2 per cent remained in private hands after the State seized the bank in 2010 – had been overvalued amid thin trading volumes.
While the shares spiked late last month at €9.20 each, the stock fell to as low as €4.65 in Dublin, in line with the IPO price range. However, they subsequently rallied off their lows to close down 14 per cent at €5.60.
Meanwhile, the prospectus revealed that while the bank made a €300 million profit in the first three months of the year, this was partially offset by what it calls “negative other comprehensive income” of €200 million. It is understood this relates to movements in the value of financial assets on the balance sheet.
