RTE has today reported that a reorganisation at Bank of Ireland which saw the establishment of a new holding company and a reduction in the number of shares in issue will take effect today on the Irish Stock Exchange.
Bank of Ireland's new shares started trading Monday at €7.38 each –compared to the 24.60 cents each where they closed last Friday. The bank has completed a reorganisation that included swapping every 30 old shares for one new share – a process known as a reverse split or stock consolidation.
The change made it look like the price of Bank of Ireland shares has suddenly soared, but in reality they are new securities and there are dramatically fewer of them in issue.
According to the Irish Independent, it is hoped that the change will take some of the volatility out of Bank of Ireland. Share consolidation is part of a wider process that was signed off by the High Court last month. Shareholders will now hold their stake in a holding company that sits at a remove from the part of the bank that holds customer deposits.
Similarly, bonds will now be issued at a remove, and in theory this will minimise the risk of a future bailouts – because shareholders and bondholders can be burned without direct implications for the operating parts of the banks.
Source: www.businessworld.ie