Barclays PLC shares plummeted Friday on increased speculations generated by the hedging of Abu Dhabi ruling family's 6.3% stake in the bank.
The ruling family of Abu Dhabi hedged its entire stake in the UK bank, which amounted to roughly 220 million shares. The sale resulted in a quick decline in the company's shares as they slumped 7 pence, or up to 2.4%, closing at 297 pence.
Abu Dhabi royal Sheikh Mansour Bin Zayed Al Nahyan entered into derivative transactions with Nomura International PLC through his investment arm of PCP Gulf Invest 3 Ltd. The deal resulted in the sale of up to 131,602,175 warrants the Sheikh held in Barclays and concluded the hedge of his entire holding of 758 million shares.
The exercising of warrants culminated in Nomura's placement of the 220 million shares in the market early Friday at a price that was close to 295 pence, according to industry sources. The shares closed at 304 pence Thursday and represent a 9 pence discount.
Exane BNP Paribas estimates the warrants exercise will boost Barclays' Core Tier 1 ratio by about 7 basis points to 10.1%.
Al Nahyan and Qatari investors invested up to GBP7 billion into Barclays in October 2008, a bid that was seen by market insiders as a mini bailout as that helped the company to avoid taking government money.
The deal gave PCP Gulf Invest 3 Ltd. the options to purchase shares at a set price of 197.775 a share; Barclays' shares have risen up to 60% since the bailout.
