AIB’s Penny Stock Mystery

I know the government are desperately in search for some good news stories. So how about this one: Our stake in AIB is worth €30 billion; we’re saved! On second thoughts, um, er, maybe not. Anyone got an explanation of Felix’s puzzle that goes beyond “well, markets are dumb, particularly illiquid ones”?

45 replies on “AIB’s Penny Stock Mystery”

It’s just some SPIVs in London playing with OPM.

I think they have 550 billion shares out there. This must be a world record.

With a bit of luck, the NPRF are busy selling like there’s no tomorrow… what are the chances… 🙁

@AIB
Thanks.
““The implied valuation of Allied Irish at about 50 billion euros makes little sense and seems to be an anomaly,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. “The increase in the government’s stake has not been fully digested.”

Which goes to prove that the barrow boys shouldn’t be trusted with your money.

It would be nice if the government could drive its stake in AIB through the heart of Fianna Fail. I can’t believe Gallagher got more than 30% in recent opinion polls.

@ Karl

How you keeping?

I had been holding AIB shares since they were €20. Got to the stage where there was no point in selling. Then this recap thing happened and I did these exact same sums. No way could AIB shares be worth 11c given the 99.8% dilution so I dumped them all at last. They subsequently fell to 3c so I felt sort of vindicated but now back at 8c., makes no sense at all.

I

@Colm Mcc

That would be my guess. There was a slightly less ridiculous, but probably more significant hedgie short squeeze involving VW and Porsche which had VW shares moving the ‘wrong’ way in 2008.

@Grumpy
Maybe it’s Micky N talking up his book. In the euphoria today anything is possible. bank of America up 10% today despite the questions being raised about them shifting dodgy derivatives from ML to the FDIC insured bank.
And some European banks up 20% despite the need for recapitalizations.
Funny times indeed.

@Grumpy
I forget to mention that Ackermann has hedged nearly all of his Italian exposure. Probably with BOA and seemingly people were demanding increased collateral over the last few weeks.

Is someone suggesting, if only vaguely, that prices as determined on the margin are not, when extrapolated, a true estimate of value/worth?

Don’t tell the traders/accountants/banks/risk committees/actuaries. It might cause a crisis of confidence in both the eurozone and the USA.

Hell, it might even cause contagion to spread, instead of doing whatever it is contagion normally does.

“How does the ISE list the market cap at €41bn and yet it is only 0.2% of the index.

All of a sudden the ISE is a €20trn market!! Those Davy/Bloxham guys deserve their bonuses after all.”

The ISE only counts the free float adjusted market cap in the index. So AIB should still make up a small, albeit artificially inflated, part of the index.

Accrding to John Fitzgerald in yesterdays’s IT:

“The banks have moved from being a liability to an asset on Ireland’s balance sheet”, said Prof FitzGerald, “the Government would sell them in time to get a return for the exchequer.”

“The banks are now our biggest assets,” he said. “Getting our money back from the banks is key to debt sustainability in the long term.”

http://www.irishtimes.com/newspaper/finance/2011/1027/1224306561503.html

Wouldn’t it be more adult to discuss this and whether it is accurate or not, and, if accurate, what are its implications, instead of the schoolboy-level of discussion in the thread so far?

@JTO

Surely if you want to have an important discussion, the most important and topical would be to discuss why the governement is going to give away €700m of our money next week to bondholders who were given any sovereign guarantee.

Meanwhile, Greek sovereign bondholders have voluntarily accepted a 50% cut in the value of their bonds.

At the same time the government is telling the Irish people that if we got a reduction in our debt we would suddenly become like Greece which is a bit like telling me if I gave €40bn to charity I would be as rich as Bill Gates.

@John TheOptimist

President Higgins says Hi John!

The comment from the member of the board of The Central Bank of Ireland is noted; and filed for posterity or should that be … er .. austerity.

I’m not sure the short squeeze theory holds water. The same numbers of existing shares still exist. There are billions of new ones that are not being traded, so proportionally the free float has collapsed, but the actual number of shares in the free float is unchanged. Given that this was enough for ‘normal’ price movements before the new shares were created, it should still be enough.

I’ll put my money on irrationality, thank you.

@David O’Donnell

President Higgins says Hi John!

JTO again:

At last, Sarkozy has found another Head-of-State he can look down on.

Shares in manufacturers of platform shoes soaring.

Entirely predictable that the alliance of the Dublin 4 media and the border region criminal classes would produce the desired result.

However, the real shocker is Dublin by-election. FF on way back up.

@Actuary

Surely if you want to have an important discussion, the most important and topical would be to discuss why the governement is going to give away €700m of our money next week to bondholders who were given any sovereign guarantee.

Meanwhile, Greek sovereign bondholders have voluntarily accepted a 50% cut in the value of their bonds.

JTO again:

I am not a bondholder, but my savings in an Irish bank are looking more and more secure, and attracting a nice real rate of interest, while the suckers who moved their savings to the UK are getting a massively negative rate of interest.

But, the real question is: will these bondholders be willing do purchase Greek bonds in the future? Suckers if they are.

@John
I hear North Tipp has followed their instincts again.

I would much prefer a Sinner 45% / Blue Shirt 45% Dail – it would be much more Visceral and entertaining debacle then the debacle we have now.
I never thought you could sleep through a Train crash but apparently you can.
We have had enough with these lowly FF bagmen.
I guess they were harmless in a way as they were not puritans – but a house with Puritans of mildly contrasting visions (given their blessing by the Godly bankers of course) would be a much more entertaining experience.

If we can just keep Labour in a presidential box for the remaining part of the millennium we will be sorted……

So Ireland has voted for a Philosopher Jester rather then a Philosopher King………I guess it took the Great War to move the conservative Irish electorate.

Gentlemen if I may ………….?

@ JTO

The only reason you have anything left in an Irish Bank is that the ordinary hardworking taxpayers of Ireland are paying for it.

The only ones being taken for suckers are the Irish people – paying for the security of your deposit.

As for the Bondholders – if there is a market they’ll sell.

‘the border region criminal classes’ – to who’s benefit was the cheque written for John? FF asked him for it via SG. You really are priceless.

🙂

@Ordinary Man

You sound as if you were one of those who moved their savings to the UK and are now feeling bitter. If you’d left your savings in an Irish bank, then you’d have no reason to be complaining now. But, look on the bright side. After last Monday, you’ll now not have to fork out for a tv license the next time FF are in government. That will save you a tidy sum.

“The banks have moved from being a liability to an asset on Ireland’s balance sheet”, said Prof FitzGerald, “the Government would sell them in time to get a return for the exchequer.”

The banks, the craythurs. Only a mother could love them.

In one of the many previous discussions of JTO’s euro deposit account, he made it clear that it is with a UK bank: Ulster Bank, Belfast. Hence he is not relying on any Irish guarantee scheme at all.

@ JTO

I never moved a penny to the UK John, I am far from bitter and I leave the TV to the good wife.

Now, would you like to address the points made in paragraphs 1,2,3 &4?

@ KD

I believe he takes investment advise from a DUP supporting Free Presbyterian (What relevance that had to investment I don’t know) advisor who works for the Ulster Bank (RBS) Donegal Sq. East in Belfast.

This person advised him to move his funds to the RoI (I am open to correction on that but 99% sure that is what he said).

@ KD

I believe he takes investment advice from a DUP supporting Free Presbyterian (What relevance that had to investment I don’t know) advisor who works for the Ulster Bank (RBS) Donegal Sq. East in Belfast.

This person advised him to move his funds to the RoI (I am open to correction on that but 99% sure that is what he said).

@ KD

and if it was with Ulster Bank, as an Irish-domiciled subsidiary of RBS, it is covered by the Irish deposit protection scheme (ie the 100k one).

@Ordinary Man

If your savings are in Ireland, then you are benefitting every bit as much as I am from the fact that Ireland did not default or devalue. If your savings are abroad, it is just sour grapes to be complaining that policies were enacted to protect the value of savings that were left in Ireland. I’m afraid that that is what governments are supposed to do. If those who had left their savings in Ireland had lost them, nobody would ever have left their savings in Ireland again. It was never a matter of whether or not the government would have the intention of ensuring that people who left their savings in Ireland would see them protected, but whether or not the Irish economy would prove strong enough for them to be able to succeed in doing so. It turns out that it was, which is why my modest gamble has paid off and why those who thought otherwise and moved their savings to the UK have lost out. But, I am glad to hear that you are not one of them.

Regarding FF’s cheque, it was perfectly legal fundraising. How is a political party supposed to know the history of everyone who contributes to it during a fundraising drive? FG, Labour and SF are all considerably richer than FF at present. Are they all certain that none of the many who have written cheques for them have a criminal record?

However, the main issue now is that, knowing his background, the Dublin 4 media, RTE in particular, conspired with the convicted one to take out the candidate whom they disapproved of. But, at least Sean Gallagher can thank his lucky stars that he got off lightly in comparison with that very unfortunate priest from Roscommon a few weeks ago. On this occasion, RTE didn’t need to fabricate the same sort of smear, although I am sure that they would have done, had it proved necessary to achieve the right result.

@Ordinary Man

This person advised him to move his funds to the RoI (I am open to correction on that but 99% sure that is what he said).

JTO again:

Almost, but not quite correct, Ordinary man.

He didn’t advise me to do it. I told him that I wanted it to be done, and he naturally did what I asked him to. He was a bit sceptical at first.

But, no need to be making out that the entire government policy since 2007 has been done for my benefit. I merely made a correct call about what was likely to happen. The reality is that the vast majority of people in Ireland with accounts in Irish banks left them there, while only a minority moved them abroad in the great panic. Those who left them there have been rewarded.

@B. EB

I’m not sure whether you’re agreeing with me or not, but Ulster Bank Belfast tells its customers: “Ulster Bank Limited is a member of the [UK] Financial Services Compensation Scheme (FSCS).”

@ JTO

John if you don’t mind I will take your points, as I believe they arise, rather than per paragraph. I hope that may bring more clarity as to my position to any interested readers ( apologies for the lack of brevity), but more importantly yourself.

JTO
‘If your savings are in Ireland, then you are benefitting every bit as much as I am from the fact that Ireland did not default or devalue. If your savings are abroad, it is just sour grapes to be complaining that policies were enacted to protect the value of savings that were left in Ireland.’

Ordinary Man
What relatively little ‘savings’ I have on deposit RoI are in An Post John. Well below risk threshold and to be frank, relatively unimportant in the grand scheme of things from a personal perspective. So no sour grapes there.

JTO
‘I’m afraid that that is what governments are supposed to do. If those who had left their savings in Ireland had lost them, nobody would ever have left their savings in Ireland again. It was never a matter of whether or not the government would have the intention of ensuring that people who left their savings in Ireland would see them protected, but whether or not the Irish economy would prove strong enough for them to be able to succeed in doing so. It turns out that it was, which is why my modest gamble has paid off and why those who thought otherwise and moved their savings to the UK have lost out.’

That’s complicated John but bottom line – b*****ks. Not the one of them that should have been in control had any control, government, regulator or investor – had any idea what they should have been doing 12 – 18months before the s**t hit the proverbial. That just doesn’t stand up.

JTO
‘But, I am glad to hear that you are not one of them.’

I am not the point John – it’s the ordinary people of Ireland and capitalism are the point. I go by the rule of risk and reward. I don’t always win, but I am happy to take it on the chin if I lose – it’s just game we play. I don’t expect anyone else to cover my risk unless I am paying for insurance and last I heard the banks were not paying insurance to the Irish taxpayer to cover their risk.

JTO
‘Regarding FF’s cheque, it was perfectly legal fundraising. How is a political party supposed to know the history of everyone who contributes to it during a fundraising drive? FG, Labour and SF are all considerably richer than FF at present. Are they all certain that none of the many who have written cheques for them have a criminal record?’

I agree. But lied for no reason, was it an instinctive response when under pressure. Could he not deal with the pressure John? Would you employ a anyone who could not take the pressure? The only person he fought back against was a woman the next day ( who had made a fool of him by asking a simple question any business person in country could answer). Is this the type of person, representative of a party (sic) who could maintain the best interests of the people and defend The Constitution? Doubt it.

JTO
‘However, the main issue now is that, knowing his background, the Dublin 4 media, RTE in particular, conspired with the convicted one to take out the candidate whom they disapproved of.’

At the indulgance of the moderators and with apologies to all.

From what I seen MMcG just exposed his hypocricy – he lied almost as a reflex action and seemed suprised that no one svallowed it. Again not to mention the lady from Stillorgan.

JTO
‘On this occasion, RTE didn’t need to fabricate the same sort of smear, although I am sure that they would have done, had it proved necessary to achieve the right result.’

Did you actually read what you have written here?

JTO
‘He didn’t advise me to do it. I told him that I wanted it to be done, and he naturally did what I asked him to. He was a bit sceptical at first.’

I stand corrected. Tell us John, did you do it as a great act of patriotism or was it purely in you own self interest? I know the answer but in case others have missed it (I personally have no problem with your answer).

JTO
‘But, no need to be making out that the entire government policy since 2007 has been done for my benefit. I merely made a correct call about what was likely to happen. The reality is that the vast majority of people in Ireland with accounts in Irish banks left them there, while only a minority moved them abroad in the great panic. Those who left them there have been rewarded.’

As I have endevoured to explain to you before John, not every movement of capital (including working capital) is for the pittance of interest paid by a bank from an entrepreneurial perspective.

As for those who have left it behind, it is always at risk if you cannot hold it in your own hand – that is why they pay you interest.

Have a great weekend and my apologies for any spelling mistakes, the length of this post and thanks for the foreberance of the moderators if I have strayed too deeply into the realms of politics.

But, I am glad to hear that you are not one of them.’

@Ordinary Man

I am going away for the weekend, so I am unable to answer all your points now. But, you are wrong on your first point, where you say:

“What relatively little ’savings’ I have on deposit RoI are in An Post John. Well below risk threshold and to be frank, relatively unimportant in the grand scheme of things from a personal perspective. So no sour grapes there.”

Your savings in An Post will have been earning a nice positive rate of interest. Congratulations! Someone (and I know many in N. Ireland) with savings in the UK Post Office will have been seeing similar savings eroded away by inflation. You are a wise man for keeping your savings in An Post, rather than moving them to the UK Post Office.

If Ireland had gone bust, your savings would not have escaped losing value just because they are in An Post. The bust would have been accompanied by Ireland exiting the euro and having a massive devaluation, as many economists argued for. Then, you would have seen a huge loss in value in your savings. One prominent economist argued for Ireland to exit the euro and have a 70% devaluation. Think what that would have done to the real value of your savings in An Post. It would also have eroded the real value of your income as well.

Regarding Sean Gallagher, he was simply taken out. He was a member of a perfectly legal political party at the time, any activities he carried out were perfectly legal and for the benefit of that party, in just the same way that members of other parties do. The media cynically tried to present it as him being corrupt and on the take, for which not one scrap of evidence was presented. There is not the slightest suggestion that he did anything illegal or immoral. It was only corrupt if one believes that capitalism itself is corrupt and that all businessmen are automatically corrupt, which obviously some people on here do (although I don’t know if you are one of them). Having said all this, however, a small part of me does have a sneaking admiration for Martin McGuinness. He character-assassinated Gallagher with deadly precision. A real professional hit. Northern ruthlessness at its finest, for which southern softness was no match. An uncharitable person might easily think that Martin had done similar before, although I’m sure he hadn’t.

Geez John the Op.

Gallagher took 700k from BES investors then screwed them with directors salaries, charging the co. 200k on his and his partners personal 2000k building for rent, taking money out as an interest-free directors loan, and moving the ownwership of patents from company ownership to personal two partners ownership.

@JTO
‘Someone (and I know many in N. Ireland) with savings in the UK Post Office will have been seeing similar savings eroded away by inflation.’

Average GBP:Euro exchange rate over period from 1 Jan 2009 to 28 Oct 2011 – 0.8739
Exchange rate 28 October 2011 – 0.8776

Not much of a loss arising there. Retail interest rates are broadly similar over that time also.

So inflation may be high in the UK but the Irish that converted their euros into GBP over the past 3 years won’t actually have lost much should they now choose to convert the GBP back to euro. And arguably they faced lower risks over the last few years by being exposed to GBP and UK banks / government.

@Dermot

You are simply taking as your starting-point the month at which sterling hit bottom. It had fallen by about 25 per cent between June 2007 and January 2009, and then it stabilised. So, the Irish, that converted their euros into GBP between June 2007 and January 2009, will have taken a huge hit. It is true that sterling stopped falling v the euro in January 2009 and has been stable since. However, UK inflation has been much higher in that time, and the Bank of England just a few weeks ago announced its intention to print oodles and oodles of money in the next few years, so another fall in sterling v the euro is extremely likely, although obviously I don’t know the precise date on which it will occur (if I did, I’d be a millionaire).

I’m not aware of much discussion prior to the bank guarantee about the need to translate savings into GBP -the concern back then was about the solvency of Irish banks and less about the ability of the euro currency to survive. If savers did translate to GBP around this time it would have served them well – euro has decreased in value from £0.97 at the end of 2008 to £0.87 today.

In any case, the British government policy of quantitative easing is the basis for your argument that the GBP is being devalued and that Irish savers of GBP are fools – my example above shows that they haven’t been fools because on average they wouldn’t have lost out had they translated euro to GBP over the last 3 years. The British government started QE1 in March 2009 and QE2 in October 2011 hence the appropriate period to judge your argument is Jan 09 to date.

Also, to your point that ‘UK inflation has been much higher in that time’ the stats don’t bear that out:

UK inflation rates were:
2006 – 2.3%
2007 – 2.3%
2008 – 3.6%
2009 – 2.2%

Whereas the EU inflation rates were:
2006 – 2.2%
2007 – 2.3%
2008 – 3.7%
2009 – 1.0%

if you are not living there, then the only relevance of the inflation rate is how it affects the exchange rate.

so, given that the exchange rate has remained fairly stable whilst some have expatriated deposits, it is fairly safe just to compare directly nominal deposit rates is it not?

@ JTO
‘I am going away for the weekend, so I am unable to answer all your points now. But, you are wrong on your first point, where you say:

“What relatively little ’savings’ I have on deposit RoI are in An Post John. Well below risk threshold and to be frank, relatively unimportant in the grand scheme of things from a personal perspective. So no sour grapes there.” ‘

John, I pay more in tax in the RoI in three months than I have on deposit in An Post – it is pin money to be used in the event off…… losing my wallet?

‘Regarding Sean Gallagher, he was simply taken out’

He took himself out, political suicide live on TV and Radio – great fun to boot.

Trust you had a great weekend.

@ Dermot

Well done sir. 😉

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