A quick look at the Unicredit (deeply discounted) rights issue
The rights issue
Those who have been reading the blog long enough might remember that Italy in general is a good hunting ground for “interesting” deeply discounted rights issues and especially Unicredit rights issues in the past were very interesting experiences.
So roughly 4 years later, Unicredit has launched another rights issue. Ex date for the subscription right has been Monday, February 6th.
The conditions were as follows:
- 13 new shares for 5 existing ones
- a subscription price of 8,09 EUR
- total volume 13 bn EUR (!!!)
- subscription rights trade under the ticker UCGAZ
The stock price prior to the announcement was ~26 EUR per share, the stock started trading at 13,11 per share on Monday but then quickly dropped to ~12,47 EUR at the time of writing.
Interestingly, this time the market for the subscription rights is much more efficient than back in 2012.
At the time of writing, the theoretical price of the subscription rights (13/5)*(12,47-8,09)=11,39 is exactly the level where the right is trading at the stock exchange. It seems that Unicredit and the banks running this exercise have learned their lessons, so no big arbitrage opportunities so far.
Some thoughts on Uncredit
Since Frenchman Jean Pierre Mustier has become Uncredit CEO last year, already a lot of stuff happened. He sold down “non-core” stakes (Poland, Pioneer, Fineco), has “bloodbathed” the 2016 result and started to sell non performing loans to outside investors.
I don’t have any deeper insights into Unicredit’s books but it looks like a much stronger and active strategy than for instance at Monte di Pasci. Will it be succesful ? Hard to say but Unicredit does have a certain “franchise”.
Looking at the stock chart, the Unicredit clearly looks “damaged”. Competitor Intesa has performed significantly better (-20% since 01.01.2016 vs. -50% for Unicredit):
According to the Unicredit strategic plan they want to earn 4,7 mn net income in 2019. This would translate into a P/E of ~6 at current prices which would indicate some upside. Also one could argue that the worst now should be behind them.
However for me, Unicredit is clearly a case for the “too hard pile”.
There are easier ways to “bet” on an Italian recovery in my opinion if one would want to do so. Without deeper research for instance Fineco, the direct banking subsidiary looks much more interesting.