Noonan takes the risk of punters buying shares in AIB
THERE was more than a little surprise at the news that Michael Noonan is to open up part of the AIB IPO to retailer punters. Share offerings to punters can be toxic for politicians. You can have all of the “buyer beware” warnings you like, but if the stock doesn’t deliver, the public often blames the Minister presiding over the flotation. It isn’t clear why he felt the need to do it.
Perhaps it has to do with all of that publicity around how much money vulture funds have bagged in recent years by buying assets, often from Nama, at rock-bottom prices and then flipping them in the short term to make a fortune.
But these bottom fishers take higher risks, and tend to invest when there is so-called blood on the streets. That is not the best time to start offering assets to punters.
There hasn’t exactly been a clamour or public outcry about getting a shot at buying into AIB. However, a retail offering has to be done at some point in the State’s sale process, otherwise AIB will be fully re-floated in a few years’ time with exclusively institutional investors on its share register.
The State will most likely sell down its shareholding in AIB in different phases. Keeping the public out of the first phase might have smacked of letting the institutions in first at a lower price.
So, is AIB a good bet? Well, first of all I wouldn’t recommend borrowing money to buy the shares. Despite this, it is not a risky investment. AIB remains a strongly capitalised bank that is unlikely to go off the rails any time soon.
The real question is about whether there will be sufficient growth in the lending economy to justify significant share price growth.
New US commerce secretary Wilbur Ross bought into Bank of Ireland shares at 9c and sold for around 30c.
That money has been made. If you look at the performance of the Irish economy and Bank of Ireland in recent years, it has done well, yet the share price is still languishing around the 27c mark. Investors who bought into PTSB in April 2015 at €4.50 per share are nursing heavy losses as the stock trades at €2.65.
Buying into AIB shares will essentially be about buying into the Irish economy recovery story. It will depend on when they are sold and at what price.