Limited interest in exercising Alpha warrants
The results of the second exercise period of Alpha Bank’s warrants showed that 60.9 mln warrants were exercised at the predefined price of 0.4576 euros.
Since each Alpha warrant incorporates the right to purchase 7.41 shares from the Hellenic Financial Stability Fund (HFSF), 451 mln shares previously held by HFSF were transferred to private investors.
This corresponds to 3.53% of total outstanding shares, implying that the HFSF stake in the bank’s share capital was reduced from 69.9% to 66.37%. HFSF proceeds amounted to 206.5 mln, implying a 7.9 mln capital gain.
In the first exercise period last December, 28.8 mln warrants were exercised corresponding to 213 mln shares transferred from HFSF to private shareholders. At that time, HFSF proceeds stood at 95.8 mln, with capital gains of 1.9 mln.
Warrants were granted for free to all private shareholders who participated in the bank’s capital increase last year and the equity raising was carried out at an issue price of 44c, equal for private investors and the HFSF.
Warrants, which are also traded on the ASE, may be exercised every six months for the next 4.5 years after their issue date in June 2013. The last exercise period is on December 10, 2017.
The exercise price is predefined and equal to the issue price (44c) with an interest rate of 3% increasing by 1% a year. Thus, HFSF potential capital gains are capped to 4% for the first year of exercise, 9% for the second year, with the highest return at 26% at the end of the last exercise period.
In contrast, warrant holders’ potential gains do not have any ceiling. As an example, investors who participated in last year’s capital increase and decided to exercise their warrants in the second period realised capital gains close to 60%.
The HFSF cannot divest the shares corresponding to the outstanding warrants for a 3-year period. After that date, HFSF can dispose its shares providing the right of first refusal to warrant holders.
Although the number of warrants exercised in the second period was more than double compared to the previous period, the total exercised warrants so far (90 mln) is just a fraction (less than 8%) of the outstanding number of 1.14 bln. The latter corresponds to 8.47 bln shares currently held by HFSF.
Unlike the other two banks (NBG and Piraeus), Alpha’s warrants are deep in the money with the current share price of 72.5c implying a 58% upside from the last warrant exercise price 45.76c.
Nevertheless, the lack of interest in warrant which is more pronounced in Alpha’s case significant potential gains, has triggered HFSF other means of disposing its banks shareholdings. exercising, given the to explore