Sovereign wealth fund converts warrants to shares which will be sold at discount to Barclays' market price
Barclays has dropped dramatically on the prospect of a major share sale after news that Qatar's sovereign wealth fund is cashing in its warrants in the bank.
The move, which will not affect Qatar's status as the bank's biggest shareholder, will see the fund convert its remaining holding of 379m units of Barclays' warrants into shares. Deutsche Bank and Goldman Sachs will then offer the stake - some 303m shares worth around £750m - to institutional shareholders at a discount of 4% to the market price.
The relationship between Barclays and Qatar followed a fundraising in 2008, which allowed the bank to avoid receiving funds from the UK government. As part of the deal Qatar received a number of warrants, selling some £1.4m of them a year later. It is now disposing of the rest, but will still hold a 6.65% stake in the bank.
Payments made by Barclays to Qatar as part of the fundraising are being looked at by the Serious Fraud Office and the Financial Services Authority.
Separately, weekend reports suggested Barclays was coming under pressure to cut back on its investment banking activities.
Barclays is currently the biggest faller on the FTSE 100, hit by the prospect of a flood of shares hitting the market. It is down 10.3p at 243.9p, a 4% decline mirroring the discount on the proposed sale price of the stake. Gary Greenwood at Shore Capital said:
We are concerned about the lack of visibility in respect of future investment banking returns given the uncertain regulatory environment and believe a reallocation of capital away from this area of the business could be beneficial for Barclays' future share price performance. Management will provide an update on strategy alongside its full year results on 12 February 2013.
Barclays shares currently trade on a...PE of 6.3 times and a dividend yield of 3.7%, which we continue to view as being relatively undemanding multiples despite a recent rally in the shares. However, Shore Capital retains a hold recommendation on Barclays' shares given the still uncertain outlook for the investment bank.
Other banks were also under pressure, with Royal Bank of Scotland down 7.5p at 286.5p on worries about libor-related fines, and Lloyds Banking Group 0.835p lower at 45.57p.
As the eurogroup meets once more to try and finally agreed on aid for Greece, and Catalonia moves closer to a vote on independence, the FTSE 100 has dipped 23.12 points to 5796.02.
British Land is among the risers, continuing its recent gains after a positive trading update. It has climbed 3p to 538p as UBS raised its recommendation from neutral to buy.
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