Metro Bank may have to give away almost half of the company as it seeks to raise £350m after disclosing an accounting fiasco.
Analysts warned that the challenger bank may have to issue new shares at up to a 40 per cent discount to its current share price, leaving existing investors holding hugely reduced stakes.
City sources said new shares are likely to be priced between 400p and 450p, compared to the 638.5p which Metro closed at on Friday.
“There are various scenarios about how this could play out and it depends on share price developments,” John Cronin, an analyst at Goodbody, told The Times. “My instinct is that a level of £4 to £5 is where the underwriters are prepared to underwrite it.”
Another senior banker added: “There will probably be a discount of 30 to 40 per cent from here.”
The bank is likely to face a backlash from its investors at this month’s annual meeting over the deeply discounted fundraiser.
Last week, the FTSE 250 bank saw its first quarter profit cut in half to £4.3m in the wake of an accounting mistake, first revealed in January, that led to the bank’s shares to plunge by 40 per cent, wiping £800m from its market value. The lender said it needed to raise £350m from investors after underestimating how much shock absorbing capital it held.
Metro was launched in 2010 by US billionaire and chairman Vernon Hill, following the financial crisis. It offers seven-day banking and high levels of service, and was widely regarded as one of the most successful challenger banks set up to contest the dominance of the UK’s high street banks. It runs 67 branches, has 1.7 million customers and holds a £22bn balance sheet.
However, the predicted pricing of its current cash call is a huge shortfall compared with last July, when investors paid 3400p per share when Metro raised £300m. The bank’s stock was priced at 2000p when it floated on the stock market in 2016.