AIB EGM - Capital Reorganisation vote

allthedoyles

Anyone doing a postal vote on the AIB shares before EGM mid December .

Investors will be offered one share for every 250 held .

Sounds like a mad plan - Friend of mine is enquiring - he's voting NO :

http://www.newstalk.com/AIB-announces-EGM-to-vote-on-capital-reorganisation

gordongekko

Government own 99.9% of the shares. Your friends vote won't matter.

OttoPilot

Not really sure what he thinks is mad about it. Currently the shares are intrinsically worth fractions of a cent so consolidation seems like a logical option.

cbaarendse

Would be a better option to buy their own stock. It will mean: Handing back money to the government; Providing consolidation; A cheaper solution; Favourable for all current shareholders, not just the government.

OttoPilot

At what price do they buy back their own stock though cbaarendse? Wouldn't make sense to management to pay market price as they're overvalued and if the govt. let them pay less it would end up being a PR fiasco.

And I don't think they would have the required cash for a significant buyback anyway. Not trying to argue but it's a tricky one to resolve...

cbaarendse

Otto Pilot, thanks for your thoughts, they got me thinking (again).

From the EGM circular: The Board is conscious of the significant financial support (in aggregate over €20.8 billion) which the Irish Government through the Minister for Finance has provided to AIB since 2008.

From todays AIB quote on ise.ie: Market Capitalisation: 20,937,537,817

2015 half year report: Operating income is about 2,600,000,000 per year

As a shareholder, I'd propose to use part of the operating income, for example 50%, to buy back stock, and not hand out any dividends. This would:

1. bring back valuation per share to more realistic levels, given that the share price would stay on recent levels. The number of shares would decrease in a more natural way;
2. allow AIB to buy back even more shares if the share price would fall (in case the market would finally see the real value). See it as a dollar-cost averaging buying scheme, which would tackle your, valid, price concern;
3. be fair to the shareholders, amongst them many Irish, who kept faith in their investment in rough times and who have a right to be treated the same as the largest shareholder;
4. be a simple and less costly mechanic compared to the line of actions they are now undertaking (which in fact also has no end date attached and because of the warrants can still mean a thorough dilution for a long period of time).

They could do this until the number of shares in the hands of the government would be in balance with the share valuation. For instance, given the example above, after 10 years, at which point the government could recoup the rest of its investment, so after roughly 50% has been resolved by the buy backs, by simply selling its stock on the market.

OttoPilot

How many of the current "shareholders" are daytraders making a quick buck though and how many legitimately lost thousands in the crash? Also are there any of the old hierarchy with significant shareholdings who would benefit from such an arrangement?

I think the government would be allergic to this because of the bad press that may come with giving money to these groups. Not to mention half of operating income is a huge amount to set aside, do you mean half of profits? In that case they won't make a dent in the shares.

I feel for legitimate investors who lost money in AIB but the market doesn't reward loyalty unfortunately. A well diversified portfolio is the only solution to get rid of this kind of risk. If you had half your money in AIB and paddy power in 2007, you would (unbelievablely) be profitable!

Hollister11

How much SHOULD the shares be selling at

Acara

OttoPilot wrote: »

How many of the current "shareholders" are daytraders making a quick buck though and how many legitimately lost thousands in the crash? Also are there any of the old hierarchy with significant shareholdings who would benefit from such an arrangement?

I think the government would be allergic to this because of the bad press that may come with giving money to these groups. Not to mention half of operating income is a huge amount to set aside, do you mean half of profits? In that case they won't make a dent in the shares.

I feel for legitimate investors who lost money in AIB but the market doesn't reward loyalty unfortunately. A well diversified portfolio is the only solution to get rid of this kind of risk. If you had half your money in AIB and paddy power in 2007, you would (unbelievablely) be profitable!

Does anyone remember when AIB was bailed out by the Gov in @ 1990 and the then Chief Executive Gerry Scanlan made a huge profit for himself. Who actually believes that AIB has changed it's ways since then.