Struggling Italian lender Banca Popolare di Vicenza effectively wiped out the savings of thousands of its small shareholders on Tuesday when it set a price range for its initial public offer, valuing its stock at a fraction of their original investment.
Popolare di Vicenza, Italy’s eighth largest bank, must raise €1.76 billion ($2 billion) and list on the market to plug a capital shortfall revealed by the European Central Bank and avert the threat of being wound down after big losses, Reuters reported.
It set an unusually wide range of €0.10 to €3 per share, saying investor interest during the pre-marketing phase was too weak to set a more specific range. The floor price is not binding so the final price could even fall below 10 euro cents.
Only a year ago, the bank sold shares at €48 apiece to many of its own customers in marketing exercises that are now under investigation in its hometown of Vicenza in northern Italy. In 2014, it was selling its shares for as much as €62.5 each.
The share sale, at least half of which is reserved for professional investors, is expected to start this week ahead of the bank’s market listing in Milan which is likely to be in the first week of May.
It comes at a turbulent time for Italian banking shares, which have lost 30% this year due to concerns about the sector’s high levels of soured loans.
As an unlisted lender, Popolare Vicenza used to be able to decide the price of its own shares. Until last year the value of the stock had been rising steadily, inflating the bank’s capitalization well above that of listed rivals.
A trader said the price range for the share sale was so wide as to be almost impossible for the market to put an independent value on the stock.
Analysts at ICBPI said that a newly created bank bailout fund would likely have to mop up the issue for no less than €1 billion.
The €5 billion Atlante fund—Atlas in English—was set up last week by predominantly private-sector investors to bail out struggling Italian lenders and prevent a wider crisis developing in the eurozone’s fourth-largest banking sector.
