The final take-up of HSBC’s fully underwritten rights issue to raise £12.5 billion ($17.7 billion) is due to be announced on April 8. It would be interesting to know what the take-up was like among HSBC’s own employees.
Last month, at the announcement of the deal, chairman Stephen Green explained how cheerfully the bank’s own senior executives were looking forward to subscribing to their entitlements under the five-for-12 deal, the third-largest rights issue ever.
The discount on the rights issue was announced at the outset – a rather macho gesture from HSBC – at a hefty 47.5% to the previous close. Given that and the generous fees on offer to sub-underwriters, would any of the bank’s senior executives care to subscribe beyond their pro-rata entitlement, Euromoney innocently asked one at the following lunch. “Well, I do have a rather large exposure already, as you can see from the published accounts,” came the testy reply.
It is, indeed, a very large cash call. Proceeds from the rights issue would, if used to capitalize an entirely new bank, rank it, even without addition of more tier 2 capital, alongside such names as Lloyds Banking Group or Dresdner Bank in the Euromoney bank capital atlas.
ECM bankers shuddered. If the HSBC deal should fail – and a large portion of new stock ending up in underwiters’ hands would amount to failure – that could close down the equity capital market in which many are now desperately trying to shore up their balance sheets.
Lower-level staff shareholders may not have been as cheerful as Green about buying new stock. “One lesson I’ve learnt is that I’m already heavily exposed to my employer,” one HSBC executive tells Euromoney, “I need to diversify my financial exposure.”
It’s a thought to occupy those banks now proposing to pay a higher proportion of bonuses in shares. Bank stock might be attractive on the way through a credit downturn and on the way out… but not on the way in.
