Bankia shares fall further as capital increase takes effect

Bailed-out bank’s preferred shareholders have lost up to 78 percent of their initial investment

Bankia’s shares fell sharply on Tuesday when the nationalized bank launched a capital increase of some 15.5 billion new shares, sparking huge losses for the preferred shareholders who have been obliged to swap the debt issued by the lender for common stock.

Bankia’s shares fell by over 20 percent early on but subsequently closed down 5.0 percent at 0.570 euros on heavy volume of 297.2 million shares.

Preferred shareholders were obliged to swap their holdings for shares at a price of 1.35 euros per share. Prior to that they had already suffered heavy losses on the value of preferred shares as part of the conditions of the 40-billion-euro European bailout to recapitalize the banking sector, most of which was used in the rescue of Bankia. As a result they incurred total losses of up to 78 percent.

Bankia has opened a process of arbitration for preferred shareholders who felt they were mis-sold a complex hybrid debt product believing it was equivalent to a term deposit.

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