What are we to make of the decisions by Wilbur Ross and Fairfax Financial Holdings to sell 2 billion Bank of Ireland shares between them?
It represented roughly one-third of their overall holding and, having paid 10 cent a share to acquire the stock in 2011, the sale has allowed them to cover the carrying costs of their initial investment. The balance of shares they hold are pure profit - the jam on top of the cake.
It seems that Deutsche Bank approached Mr Ross, a specialist investor in distressed assets, and Fairfax to see if they would be prepared to sell this block of shares in question and both replied in the affirmative.
It has aided liquidity in Bank of Ireland shares, which were tightly held.
As such it wasn’t a conscious decision by Mr Ross or Fairfax to sell out of Bank of Ireland or a signal that their confidence in the Irish economic recovery story is in any way dimmed. It seems that they intend to retain the balance of the stock for some time to come.
The Minister for Finance Michael Noonan didn't seem to be too perturbed at the share sale. "If Mr Ross and Fairfax have decided to take some profits at this point that's their decision. They backed Ireland when few others were prepared to do so, so well done to them," he said in a statement to The Irish Times.
The sale was oversubscribed, a signal that external investor interest remains strong in Bank of Ireland. This should come as no surprise given the strong set of annual results that the bank published on Monday.
Bank of Ireland is back in profit and once again generating capital, with the level of default reducing and the number of owner-occupied arrears coming down.
It was the only one of the domestic Irish banks not to become majority owned by the State and markets have warmed to the story, with the share price up 144 per cent on a year ago.
Bank of Ireland’s share price was down 8 per cent earlier, to just above the 33 cent level of the share placing. This is no great surprise. A better indicator will be how the stock performs in the coming days and weeks. Given the positivity surrounding the bank at the minute there’s no reason to believe that the dip of the past couple of days is anything other than a short-term blip.
