Shares in HBOS slumped yesterday as the scale of the flop of the bank’s £4bn rights issue unnerved investors.
The investment banks underwriting HBOS’s £4billion rights issue took a £100m paper loss yesterday after the closure of one of the City’s least popular capital-raisings.
The UK’s biggest mortgage lender revealed that just 8.3% of its investors took up their allocations in the 275p rights issue – a result that came in below even the most pessimistic market expectations. In the subsequent frantic efforts to place unsold stock directly in the market, the underwriters of the issue, Morgan Stanley and Dresdner Kleinwort, were able to find buyers for only about a third of the rump to lift the eventual take-up to 38%.
That still left them with 62% of the unwanted shares – worth £2.5bn at the offer price – in one of the most poorly supported rights issues of recent times.
Underwriters have not faced the prospect of being left with stock on this scale since a placing by oil group BP in the stock market crash of 1987 when 95% of stock ended up with the underwriters.
Financial Times, The Times