London: Abu Dhabi sold more than 11% of Barclays Plc., making $2.5 billion (Rs11,775 crore) from an investment that helped the UK bank through the financial crisis and raising fears more may cash in on a recent rally in bank shares.
The Abu Dhabi government-owned International Petroleum Investment Co. (IPIC) on Tuesday sold about £3.5 billion worth of instruments that are due to convert into Barclays shares by the end of June. The shares were sold at 265 pence a share, said Credit Suisse AG, which handled the sale. The placing was at a 16% discount from Monday’s close of 316.25 pence.
The sale also stoked fears that other big Barclays investors may also look to take profits, and that other sovereign wealth funds might be looking to exit the investments they have made. Barclays raised funds from Qatar, China, Japan and Singapore investors last year.
“This tactical move brings into question any foreign investment in major companies—in particular investment from the Middle East,” said Manoj Ladwa, senior trader at London spread betters ETX Capital. “I would expect further falls from companies with similar exposure.”
“It’s clearly a negative signal for the banking sector,” said David Thebault, head of quantitative sales trading at Global Equities in Paris. “After stepping in at the beginning of the credit crisis to buy stakes in troubled banks, these guys (Abu Dhabi) are now saying: ‘The recovery rally in financial stocks is over and the shares are now ripe for profit taking’.”
Singapore’s state investor Temasek Holdings Pte Ltd owns just under 2% of Barclays and its incoming chief executive may cut its holding in banks as he reallocates money to energy and consumer sectors, Nomura analysts said earlier on Tuesday.
IPIC, an investment vehicle of the Abu Dhabi royal family, will have almost doubled its money since buying the mandatorily convertible notes (MCNs) in October, when Barclays raised funds privately rather than take a handout from the UK taxpayer.
The fund-raising angered existing shareholders at the time. They said the West Asian investors were offered more attractive terms than they could get.
The MCNs are due to convert into about 1.3 billion shares at 153 pence per share before the end of this month. Including the conversion of other MCNs sold last year but excluding warrants held by Abu Dhabi and others, the stake sold represents just over 11% of the British bank.