Barclays shares slide as key Gulf investor sells £3.5bn stake
The news appears to have taken Barclays by surprise, as the bank had been braced for a number of Gulf investors to take a combined 30% stake on 30 June
- guardian.co.uk, Tuesday 2 June 2009 19.32 BST
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Sheikh Mansour bin Zayed al-Nahyan, who has sold his Barclays stake. Photograph: Rabih Moghrabi/AFP/Getty Images
The UK taxpayer was tonight sitting on a multi-billion pound paper loss on its holdings in Royal Bank of Scotland and Lloyds Banking Group – in stark contrast to a member of the Abu Dhabi ruling family who made a £1.4bn profit on shares he bought last year during the Gulf bailout of Barclays.
Sheikh Mansour bin Zayed al-Nahyan stunned the City by selling his 11% stake after just seven months, putting Barclays' management under renewed pressure over the £7bn Middle East fundraising.
Barclays shares fell 13% after the 1.3bn shares were placed with about 200 institutional investors at 265p a share in a rapid sale executed by investment bank Credit Suisse overnight on Monday. The shares closed above the placing price at 273.5p.
Credit Suisse was tonight believed to be trying to offload another £1.25bn of investments in Barclays in a sale that could be completed by tomorrow.
John Varley, chief executive of Barclays, had heralded Mansour, who owns Manchester City football club, as a long-term strategic investor when he was brought in last October and helped the bank avoid taking UK taxpayers' money.
While Mansour has made a profit, the shares of banks bailed out by the taxpayer, RBS and Lloyds, are trading below the price at which the Treasury bought in. RBS closed 12p below the 50p average the taxpayer paid while Lloyds closed 50p below the 120p average indicating a loss for the taxpayer of at least £5bn. Lloyds is currently conducting a rights issue at 38.4p.
One City investor said: "This is uncomfortable for Barclays' management given the way in which the original deal was sold to us. It was all about strategic long-term relationships bringing more to the company than simply money."
Barclays' fundraising was controversial at the outset. City investors almost voted down the move in anger that the bank had ignored their preemption rights – in theory they should be offered any new shares before outside investors are invited in.
Those shareholders were today buying the stock offloaded by Mansour, whose investment was initially made in his name then transferred to International Petroleum Investment Company (IPIC). Qatar is also backing Barclays through Qatar Holding and Challenger in the complex fundraising that involved buying mandatorily convertible notes (MCN), reserve capital instruments (RCI) and warrants rather than straightforward shares.
IPIC today sold its entire MCN stake which had been due to convert into 1.3bn shares at the end of June, when Middle Eastern investors would have held close to 30% of Barclays shares. The £1.25bn of RCIs it owns could be sold tomorrow.
Sheikh Mansour is holding on to warrants which allow him to buy 780m Barclays shares at 198p until autumn 2013.
His sudden share sale prompted concerns that the other major investors may also decide to shed their stakes after enduring rollercoaster share price movements. Barclays has traded as low as 50p.Khadem al-Qubaisi, IPIC's managing director, insisted the decision to sell out "reflects the focus of IPIC's long-term investment strategy on hydrocarbon-related opportunities".
Manoj Ladwa, senior trader at spread bet firm ETX Capital, said: "This tactical moves brings into question any foreign investment in major companies with similar exposure."
Others were less concerned. "A key question now is the potential for further stake sales. We are not overly concerned," said Jonathan Pierce, analyst at Credit Suisse.
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