Credit Suisse Shares Hit All-Time Low Amid Subscription Rights Sell-Off
Shares of Credit Suisse fell to an all-time low Tuesday morning after investors offloaded rights to subscribe to the bank’s new shares, Reuters reported. Credit Suisse’s stock fell to 2.89 CHF earlier today, before slightly recovering to 2.90 CHF.
Credit Suisse’s Turnaround Plan at Risk as Investors Sell Subscription Rights
Switzerland’s Credit Suisse faced another hurdle Tuesday as the bank’s shares fell to a fresh all-time low of 2.89 Swiss francs (CHF) in early trading. The drop came after investors sold subscription rights to new shares, impeding the bank’s turnaround plan.
Subscription rights to the lender’s new shares plummeted 22% to 0.112 amid the sell-off. Credit Suisse’s stock price briefly recovered and stood at 2.90 Swiss francs (CHF) at the time of the writing.
Last week, the Swiss bank issued 889 million new shares to existing investors at 2.52 Swiss francs ($2.67) apiece, amounting to a capital increase of 4 billion CHF. The capital hike, which won investors’ approval on Wednesday, aims to finance the bank’s recovery plan amid its biggest-ever financial crisis.
The Saudi National Bank purchased 307 million new shares, making the biggest investor with a stake of 9.9%. Meanwhile, Credit Suisse’s 5-year default swaps, which serve to bondholders as insurance, jumped to a new all-time high of 403 basis points, according to S&P Market Intelligence.
The capital increase provided the bank’s existing shareholders with one pre-emptive subscription right for each share they owned on Nov. 25. Seven subscription rights allow the investor to buy two new shares at a reduced price of 2.52 CHF in the period between Nov. 28 and Dec. 8.
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Credit Suisse’s Worst-Ever Crisis Deepens
The drop to a new record low represents the latest in a myriad of challenges Credit Suisse faced this year. Earlier this month, Switzerland’s second-largest bank projected a $1.6 billion loss for the fourth quarter after customers pulled out billions of dollars in investments and deposits.
More specifically, customers withdrew around $88.3 billion in investments and deposits from Sept. 30 to Nov. 11, the bank said in a statement. The figure represented 6% of the bank’s total assets under management (AUM).
Credit Suisse reported a net loss of 4.034 billion Swiss francs ($4.09 billion) in Q3, missing the consensus estimates of 567.93 million Swiss francs. The figure was also a far cry from the bank’s 434 million Swiss franc profit in the same quarter last year. Moreover, the bank facilitated a transfer of more than $100 billion for clients involved in numerous illicit activities this year.
Do you think Credit Suisse will manage to overcome the ongoing crisis and avoid a potential bankruptcy? Let us know in the comments below.