St George Bank has raised A$766 million by issuing shares.
St George Bank has issued 21.9 million heavily oversubscribed new shares to institutional investors, and as a result has raised A$766 million in a hot market. However, market enthusiasm has sparked analyst speculation that the bank could have easily raised more than A$1 billion. In addition, the shares issue will see older shareholders' holdings become more diluted.
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St George Bank, one of the five largest banks in Australia, has raised A$766 million in what turned out to be a heavily oversubscribed issue. The book-build was completed at a price of A$35 per share, slightly lower than the closing stock price of A$38.20. Following the unveiling of the issuing, the bank's share price reacted to the book-build price of A$35 by sliding from A$38.20 to A$37, leaving a premium of A$2 relative to the book-build price.
The 21.9 million shares were snapped up by a market that evidently has strong faith in St George's future prospects, leading to speculation that the bank could easily have raised more capital. Indeed, some analysts estimated that St George could have raised over A$1 billion.
St George's new chief executive, Paul Fegan, recently took over the reins of the bank from previous chief executive Gail Kelly, who had a very successful run at the bank, but who has since moved on to Westpac. Mr Fegan was quoted as saying, "we are very pleased with the strong show of support the market has given us."
The recent additional issue of stock is expected to be used to fund St George's future growth, with the bank planning to expand its risk-weighted assets by A$8.5 billion. Analysts predict that the share issue will fund the bank into 2009.
However, the result of St George's additional stock issue is a mixed victory. Although it is encouraging that the market enthusiastically snapped up the shares, it seems that St George could have received a higher price, and that wealth has been transferred from current shareholders to new institutional subscribers. Older shareholders will see their holdings diluted by the 21.9 million new stocks, which corresponds to 4% of the bank's equity base. 'End Intelliext
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