Bank Fiasco? Not this time…

Ashby Monk

Bank stocks have been the bane of many SWFs. So, when a large Government-owned, Middle Eastern investor put in a sell order for over one billion shares in Barclays, you’d be forgiven for assuming the investor was cutting its losses and moving on. But you’d be wrong.

International Petroleum Investment Co, which is wholly owned by the Abu Dhabi government, sold mandatory convertible notes equivalent to 1.3 billion Barclays shares. The trade looks to be a home run:

“The stock converted at 153 pence per share. At the Monday closing price of 316.25 pence, the stock’s high for the year, Abu Dhabi’s £2 billion investment would be worth about £4.1 billion.”

Because they are selling over one billion shares, they probably won’t get the prevailing market price, so take a small discount off that. Nonetheless, this is one (rare) piece of good news for the sovereign investors.

It is a bit odd that this big win should come from IPIC, which is the Abu Dhabi state enterprise responsible for foreign investments in the oil and chemicals sector…not the financial services sector. So, while I congratulate them on the big win, I can’t help but wonder how they got into such a large position in a sector outside of their official mandate? Who allowed this trade to go through in the first place? Anyway, I’ll worry about IPIC’s governance another time…

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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