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HBOS investors snub share issue HBOS investors snub share issue
(about 2 hours later)
Investors in UK bank HBOS have overwhelmingly declined the chance to buy new shares in the firm.Investors in UK bank HBOS have overwhelmingly declined the chance to buy new shares in the firm.
The top mortgage lender announced that just 8.29% of the new shares offered in its £4bn rights issue were taken up.The top mortgage lender announced that just 8.29% of the new shares offered in its £4bn rights issue were taken up.
HBOS shares were available on the stock market for less than the 275 pence issue price last week, making it unattractive to shareholders.HBOS shares were available on the stock market for less than the 275 pence issue price last week, making it unattractive to shareholders.
But HBOS will still get the £4bn it wanted, as the unsold new shares will be bought by the issue's underwriters.But HBOS will still get the £4bn it wanted, as the unsold new shares will be bought by the issue's underwriters.
Underwriters Morgan Stanley and Dresdner have two days to find buyers willing to pay at least 275p a share before they have to buy the shares.Underwriters Morgan Stanley and Dresdner have two days to find buyers willing to pay at least 275p a share before they have to buy the shares.
The deal will probably enter the City lexicon as the phrase "doing an HBOS", to mean how not to raise money. Robert Peston, BBC Business editor Read Robert Peston's blogSee HBOS share price over past three monthsThe deal will probably enter the City lexicon as the phrase "doing an HBOS", to mean how not to raise money. Robert Peston, BBC Business editor Read Robert Peston's blogSee HBOS share price over past three months
They may have difficulty finding buyers at that price, as HBOS shares were down 4.2% or 11.75 pence at 270.25p in early trading. HBOS shares fell to 270p in early trading in London before recovering slightly to trade at 275p.
"The market knows that the underwriters would want to sell their stock at the earliest opportunity, which would keep HBOS's shares under downward pressure at a time when the weak housing market is doing quite enough to depress its shares," the BBC's business editor Robert Peston said."The market knows that the underwriters would want to sell their stock at the earliest opportunity, which would keep HBOS's shares under downward pressure at a time when the weak housing market is doing quite enough to depress its shares," the BBC's business editor Robert Peston said.
"The deal will probably enter the City lexicon as the phrase "doing an HBOS", to mean how not to raise money - though that would be unfair, because HBOS is the victim of a rights-issue system that is cumbersome and slow," he added."The deal will probably enter the City lexicon as the phrase "doing an HBOS", to mean how not to raise money - though that would be unfair, because HBOS is the victim of a rights-issue system that is cumbersome and slow," he added.
When HBOS launched its rights issue in April, its shares cost about 500p.When HBOS launched its rights issue in April, its shares cost about 500p.
Shareholders were offered two new shares at the then heavily-discounted price of 275p for every five shares they already owned.Shareholders were offered two new shares at the then heavily-discounted price of 275p for every five shares they already owned.
'Fierce financial storm''Fierce financial storm'
Since then, housing market concerns and fears about further write-downs in the banking sector have weighed heavily on shares.Since then, housing market concerns and fears about further write-downs in the banking sector have weighed heavily on shares.
We saw unprecedented volatility in bank stocks HBOS spokesmanWe saw unprecedented volatility in bank stocks HBOS spokesman
"The rights issue was conducted in the middle of a fierce financial storm," a HBOS spokesman said."The rights issue was conducted in the middle of a fierce financial storm," a HBOS spokesman said.
"We saw unprecedented volatility in bank stocks.""We saw unprecedented volatility in bank stocks."
But the bank stressed that it had still managed to raise £4bn.But the bank stressed that it had still managed to raise £4bn.
HBOS is one of a host of leading British banks to tap their shareholders for extra cash to strengthen their balance sheets as the fallout from the credit crunch continues.HBOS is one of a host of leading British banks to tap their shareholders for extra cash to strengthen their balance sheets as the fallout from the credit crunch continues.
The Royal Bank of Scotland has raised £12bn while Barclays has secured £4.5bn in new funding from a range of foreign investors.The Royal Bank of Scotland has raised £12bn while Barclays has secured £4.5bn in new funding from a range of foreign investors.
Barclays announced last week that 19% of its new shares had been taken up by existing investors.Barclays announced last week that 19% of its new shares had been taken up by existing investors.