HBOS - shares down through the 275p rights price on Friday afternoon - albeit momentarily at 15.03 BST.
The idea that sustained weakness in the bank’s stock as it seeks to raise £4bn in new capital was the result of nefarious speculators, forcing the stock lower with a view to closing their positions when the rights flops, looks rather off-beam now. Or maybe the price would be lower still, but for the huffing and puffing of the regulatory authorities and the hasty introduction of form TR-3.
What happens next, we are not quite sure. Trading in the nil-paid rights is still a week away, with the cash call closing on July 18. Assuming the next month does not see a sudden and wholly unexpected improvement in the British housing market (and a resurrection of the monoline debt insurers), Morgan Stanley, Dresdner and their subunderwriters are now in serious danger of becoming forced buyers of HBOS at the wrong price.
HBOS has already made it abundantly clear that it has no intention of doing-a-Bungle and repricing its rights in a re-refinancing. In the case of Bradford & Bingley the underwriters were able to point to a material adverse change in the mortgage bank’s prospects; with HBOS it might be painfully adverse, but nothing much changed with Thursday’s trading update.
Will the “subbers” dump their holdings? A rights flop would be tantamount to a mass market vote of no confidence in the bank’s prospects. And confidence is as crucial as capital for such an important institution.
Or will this fictional bank robbery turn into a real life share raid instead? Stand by for rumours of stake building as HBOS bounces off its lows.
Related links
Markets Live transcript from Friday morning - FT Alphaville
