Monte dei Paschi launched a 2.5 billion euro cash call

Monte dei Paschi launched a 2.5 billion euro cash call

MILAN (Reuters) – Italy’s Monte dei Paschi di Siena on Monday launched a new share sale, its seventh in 14 years, seeking to raise up to 2.5 billion euros ($2.4 billion) to fund its latest turnaround plan.

MPS, which is state-owned after its 2017 bailout, is offering shareholders 374 new shares for every three shares held at €2 per share.

On Friday, Consob, the Italian market regulator, set the stock reference price at 2.0630 euros per share, excluding the theoretical subscription rights price of 7.8371 euros per share.

The stock rose sharply in early trading on Monday, leading to the suspension of automatic trading. By 0704 GMT, it rose 7.6% to 2,219 euros each.

Rights failed to trade and were indicated as low at €6.27 each.

Refinitiv data showed the stock’s value has more than halved over the past five days, taking the overall decline so far this year to nearly 90%.

MPS’s shrinking market capitalization reduced the discount the bank was able to offer on new shares far below what is typical for this type of offering, resulting in a higher valuation than its healthier peers.

Due to the high risk of unsold shares, MPS struggled to insure insurers, only being able to sign a guarantee contract at the last minute.

To secure the support, it agreed to pay €125 million in fees and had to find investors who agreed to buy half of the €900 million portion of the capital increase that the state could not cover.

(1 dollar = 1.0290 euros)

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