Weekend read: What’s going on with Bankia stocks?

Just two hours after Bankia stocks closed their worst session –and they had a few bad already- the Spanish National Securities Market Commission (CNMV) issued a statement warning saying that will “proceed to examine in detail the operations of the session in order to verify that everything complies with the existing legal regulation and, in particular, the one applying on the market functioning.”

The regulator was surprised -if this word still means anything in the Bankia case- about the volume of stocks traded: 49.39 million of ‘bankias’ changed hands on Thursday, which represents almost two and half times more than its share capital 19.93 million titles.

To start understanding the case, it is important to know that the top three sellers brokers that date – apart from purchases- were foreigners. In particular, Madrid bureaus of UBS (-6.86 million), Credit Suisse (-4.55 million) and Morgan Stanley (-4.25 million).

Record after record
At the other end of the scale there were also Madrilian brokerage firms of Mercavalor (+5.12 million shares), Renta 4 (+3,35 billion) and Santander Bolsa (+2.33 million ).

Bankia ended up collapsing, a historical 51.43% drop to close at 0.68 euros, also the new world record. This makes ‘bankias’ another ‘penny stock’ more, those traded below the euro threshold. The worrying part is that without the ‘reverse split’ from a few weeks ago, at 100 new shares for each old, the listed chaired by Mr. Goirigolzarri would be blocked in the style of Banco de Valencia.

An “incidental” fall

There is no “unique and intrinsic reason” to explain this stock behavior of nationalized bank, said market strategist at IG Markets Daniel Pingarrón to Europa Press. “Bankia has accustomed us to be very volatile, but the fall on Thursday was circumstantial” he emphasized. A new rally could still happen, he added.

Meanwhile, Regino Garcia XTB Analyst, had already warned in an analysis published in this newspaper that Bankia “downward path only has short, medium and long term”, with a target of 0.15 euros per share. Seeing is believing.

The “coco” is coming

The truth is that within the next step in the process of recapitalization of the company involves registering at the Commercial Register the stocks on the capital increase after the conversion of convertible bonds (“cocos”) and hybrids exchange. These securities will be issued on May 28 at 1.35 euros. The market will thrill the market.

But as emotions goes, those of Kyril of Bulgaria after the bearish position taken by his hedge fund GLG Partners, which is responsible in the Iberian Peninsula. The first communication to the CNMV took place on April 17 at a rate of 0,52% as Valencia Plaza first reported. That day the stock closed –including the counter split- at 17.20 euros compared to 0.68 euros the day of the big selling, representing a 96.05% plunge.
This huge crash has filled the pockets of GLG Partners with 1.7 million euros. Considering the reference of both dates, the percentage testified to the regulator and without any kind of leverage or interest on the loan of shares.

Winners and losers
“As much as they criticize him, he did nothing against the law, just went ‘short’ because he understood that Bankia was going to collapse; now he is just cashing that collapse,” a fund manager told Valencia Plaza.

“The sad thing is that at the same time small investors get no answer to this historic crash of a Spanish stock”, he adds laconically.

A short seller that got out before he should

The opportunity found by Kyril of Bulgaria was missed by another short seller who kept Bankia for a few days. Wellington Management declared a ‘short’ position of 0.75% on the last day of April and vanished three days later, as Valencia Plaza reported.

According to the latest communication from CNMV, Bankia had until May 17 0,80% of its shares in bearish positions, with 0.52% owned by GLG Partners. It has to be noted that the CNMV “exposes” the names of all those short “bears” – to avoid speculators – that enter a Spanish capital of a listed company with a position higher than 0.5%. It also mandates to inform on the positions above 0.2%, while maintaining anonymity up to the threshold of 0.5%. Hence there can be an entity -usually hedge funds- which use intermediary companies with packages of 0.19% without revealing their position to regulator.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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