AIB shares plunge on bank’s reorganisation plans

AIB plunged in Dublin trading as the lender prepares to cut the number of shares it has in issue by more than 99 per cent in an reorganization of its capital structure before a government stake sale next year.

Shares in AIB, which has a free float of 0.2 per cent after the Government took over the bank in 2010, plunged as much as 46 per cent to 3.1 cents in Dublin trading on Wednesday. They were trading down 38 per cent at 3.5 cents , bringing their decline since Tuesday morning to 51 per cent.

Minister for Finance Michael Noonan has repeatedly warned in the past year that AIB's tradable stock is overvalued, as the number of shares in issue ballooned to 523 billion amid multiple bailouts since 2009.

The bank said on Tuesday it plans to consolidate stock on a 1-for-250 basis and allow the government to convert some of its preferred shares into ordinary stock at 1.7 cents each.

"It appears to be becoming clearer to AIB's shareholders that the market value ascribed to the shares has been inflated for some time," said John Cronin, an analyst with Investec.

The 1.7-cent valuation is the basis under which the government plans to convert some of its €3.5 billion of preferred stock in the bank into equity. This is part of a blueprint to simplify the capital structure before the state begins to sell its 99.8 per cent stake as early as next year.

Bloomberg