About 6,500 small Irish investors bought shares in AIB when it floated on Friday, spending an average of €46,150 each.
Small investors had to commit at least €10,000 to participate in Europe’s largest initial public offering (IPO) so far this year, as AIB returned to the main stock markets in Dublin and London after 7½ years under almost complete State ownership.
About 80 per cent of the small, or retail, investors who participated put in orders with stockbrokers for up to €50,000 of stock and received all that they sought. Those who pitched for more received 53 per cent of the amount they applied for above €50,000.
The market value of AIB rose almost 6 per cent to €12.6 billion in Dublin, after the State raised €3.4 billion selling a 28.8 per cent stake in the bank on the market. Minister for Finance Paschal Donohoe said flotation opens a "clear path for the Irish taxpayer to regain all the money that went into AIB".
Irish taxpayers were forced to pump €20.8 billion into AIB during the financial crisis to prevent the lender from collapsing as it grappled with spiralling bad loans. While AIB had returned €6.8 billion to the exchequer before the initial public offering, including capital repayments, interest and fees for Government guarantees, it could take up to a decade before the State can extricate itself from the bank.
While smaller investors received most of the shares they applied for, big sovereign wealth and pension funds as well as asset managers got only a fraction of what they sought, as orders amounted to 4.5 times the amount of stock that was on offer.
Sources said the Government and investment banks advising it decided not to give any shares to about one-third of big investors that sought access to the deal. It is believed that these were many hedge funds, who have a short-term view.
Mr Donohoe rejected suggestions from reporters on Friday that the Government should have squeezed more out of potential investors after the stock advanced on their first day of trading.
He said that the “trade-off” in pricing the share sale, is to ensure that the new investors “feel that they got good value”, as the Government aims to sell its remaining 71 per cent interest in time.
"A 5.7 per cent increase isn't very much after an IPO," said Chris Wheeler, a London-based analyst with US brokerage Atlantic Equities.
“If it had popped 20 per cent, people could rightly have said it had been underpriced. While AIB didn’t need to be priced to go, it is important that there is some upside for investors – especially as Ireland will be seeking to go back to investors to buy further shares in future.”
The Government has consistently rebuffed demands from Opposition parties that Ireland should use the proceeds from the share sale to finance infrastructure, including new home building to ease the housing crisis, saying it must adhere to EU fiscal rules and use the money to reduce its debt level. Gross Government debt stood at €200.6 billion at the end of 2016.
“But if those rules were not there, I would still argue that the right thing to do is when we have the ability to get down our debt, we should do it,” Mr Donohoe said on Friday.
“Across the period of the crisis, so many people pointed to the fact that during a time of recession you should have the ability to borrow more, [AND]during a time of stability and marginal growth, you should be building your ability to borrow in the future if you need it.”
The Minister declined to say when he plans to sell further shares in AIB, Bank of Ireland, in which the State owns a 14 per cent worth €1 billion, or Permanent TSB, where the taxpayer 75 per cent holding is worth €956 million.