American depository receipts of Barclays are down roughly 11% after a key investor who arrived to rescue the British institution at the height of last year's financial crisis - and was touted as a long-term investor - cashed in its stake. But what does that decision mean?
On the one hand, the fact that the investor - an Abu Dhabi-based investment group International Petroleum Investment Corp. - was able to unload its stake in Barclays to willing buyers implies some healing in the capital markets.
At the same time, IPIC had to accept a 20% price cut on the shares compared to Monday's closing price, according to Heard on the Street's Simon Nixon, which is helping to push Barclays shares lower.
Speaking to Reuters, David Thebault, head of quantitative sales trading at Global Equities in Paris, said "It's clearly a negative signal for the banking sector … After stepping in at the beginning of the credit crisis to buy stakes in troubled banks, these guys (Abu Dhabi) are now saying: 'the recovery rally in financial stocks is over and the shares are now ripe for profit taking.'"
An analyst note on the deal from Societe Generale was equally dour on the news. Asheefa Sarangi wrote that "we believe that a strategic long-term investor attempting to divest c.61% of its potential holding (post-MCN and warrants) this quickly should not be taken as a positive sign. We continue to be concerned about the robustness of Barclays' balance sheet."
The real question is whether IPIC's stake sale will prompt other sovereign funds to try to cash out as well. Signapore's state-owned investment company Temasek and a Qatar government holding company by the name of Challenger also own stakes in the bank. In a research note out earlier today, Credit Suisse analysts wrote of the possibility of further sales, saying "We are not overly concerned. The IPIC holding was the biggest single block of shares held in the company and Qatar, IPIC and Challenger now hold "only" 10%."
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