Update: and rejected
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Last Friday a fake Deutsche Bank headline saved the market. Can they do it again? It appears that just like a certain Saudi prince took a bath in Citi sevearl years ago, a greater fool has been found again, according to Spiegel:
Remember when Korea's SWF was going to take a stake in Lehman?
For now it's working…
Although it may not last long. First, the story is 4 hours old..
Qatari investors who own the largest stake in Deutsche Bank do not plan to sell their shares and could consider buying more if the embattled German bank decides to raise capital, sources familiar with Qatari investment policy told Reuters.
Funds controlled by Qatar's former Prime Minister Sheikh Hamad bin Jassim al-Thani bought 6.1 percent of Deutsche in mid-2014 and increased their stake to just under 10 percent, including options, in July this year.
Second, what DB needs is to raise capital; it can only do that by selling shares to Qatar directly, and not for the Qatari investors to buy stock in the open market, of which DB would see precisely zero in proceeds.
Third, by announcing their intentions to buy the stock ahead of actually doing so, Qatar guarantees it will pay much more for the same “25% stake”. Brilliant.
Fourth, and final, as Reuters reports, the Qataris have so far lost, on paper, over $1.2 billion on their investments in the bank. It is therefore far more likely that Qatar is using first Reuters, then Spiegel, to get the price as higher as possible – just like the rumor spreaders last week used AFP – to that they can sell into the bid.
Especially, when one considers the following story from 2014:
The man who is providing Deutsche Bank AG with a 2.1 billion-euro ($2.9 billion) cash infusion, and a vote of confidence, held talks with banks about getting a loan to finance the investment and to hedge it. Former Qatari Prime Minister Sheikh Hamad Bin Jassim Bin Jabr Al Thani was approached by banks offering loans to fund the purchase as well as derivatives to protect him from losses on the shares he purchased, said four market participants who asked not to be identified because they weren’t authorized to speak publicly. Two of the participants said they were told Qatar National Bank agreed to provide a $2 billion margin loan.
An official at Sheikh Hamad’s office in Doha declined to comment on the talks, as did representatives for Qatar National Bank and Frankfurt-based Deutsche Bank. If Sheikh Hamad’s investment turns out to have been structured to limit his financial risk in the stock, that would be a red flag, according to Peter Hahn, a finance lecturer at London’s Cass Business School.
“That should be a concern for all Deutsche Bank shareholders,” Hahn said. “What sounded like a vote of confidence may be a hedged bet.”
In a margin loan, a borrower pledges an asset to obtain money and typically agrees to hand over cash to the lender if the value of the collateral declines. The lender typically can sell some of collateral if the borrower is unable to post cash.
“There’s a growing trend among sovereign wealth funds to buy on margin,” said Bernardo Bortolotti, director of the Sovereign Investment Lab, a research unit at Bocconi University in Milan. “An investment of this magnitude is rare, and it’s likely to attract significant interest for financing from banks seeking fees.”
Instead of “voicing confidence” in DB, is Qatar just just trying to find a way to get rid of what may be a rather pesky $1.2 billion margin call?