MALTA: State bid to stop Lombard Bank share issue.

As published on maltatoday.com.mt, Monday 17 October, 2022.

A state agency that disburses Malta’s golden passport cash funds, is objecting to plans by Lombard Bank – in which it acquired a 49% stake – for a new share issue that would dilute the State’s interest.

The National Development and Social Fund (NDSF) administers the receipts of Malta’s citizenship-by-investment programme, which it disburses as grants or invests in blue-chip stocks.

In 2018 the posterity fund acquired a 49% equity in the private Lombard Bank – valued at just over €51 million – to facilitate the exit of the now-defunct Cyprus Popular Bank. The move was intended at safeguarding the domestic position of Lombard Bank, which is the owner of Malta’s major postal service, Maltapost.

Since then however, the government has not divested itself of its shareholding as originally intended.

But government sources speaking to this newspaper said the NDSF was caught unprepared by the bank’s announcement that it intends to access the capital markets with a share issue.

That much was confirmed in a letter sent by the NDSF to the bank’s management and board of directors, in which it objected to the new share issue and what this would do to the value of the agency’s – effectively government’s – shareholding.

Over 1,200 shareholders, and investment funds, hold the remaining shares in Lombard Bank, which besides the NDSF, is owned by Virtu Holdings (9.89%), LifeStar Insurance (5.59%) and First Gemini p.l.c. (5.31%).

Lombard has a controlling 71.5% stake in Redbox, the owner of postal operator Maltapost plc.

Shareholders will now be asked on 10 November to approve a proposed share split, which is intended to allow easier access to a larger number of investors to acquire shares, so that this increases trading liquidity in the share issue.

But it is the announced share issue – not the share split – that has current and prospective investors worried. Lombard Bank has not yet indicated how large a share issue it is planning. Currently it has an allocation of 80 million ordinary shares at 25c each – €20 million – with over 45 million shares issued for a value of €11.3 million.

Investors understand that the share-split would help encourage trading activity, by making these ‘split’ shares accessible to a wider spectrum of investors.

But it is the share issue that can prove quite contentious, since it dilutes existing shareholders’ power unless they invest in the new issue and buy more shares to maintain their current level of shareholding percentage.

That is an issue of no concern to either small or incoming retail investors. But to the Maltese government and other corporate investors, it leads to a diluted influence.

When contacted, Lombard Bank CEO Joe Said – who is also director of the private investment fund First Gemini – refused to issue any comment on the NDSF’s position.

Said that as an entity listed on the Malta Stock Exchange, “Lombard Bank is bound by regulatory obligations, a number of which also relate to disclosure of price sensitive information”.

He said that once the bank considers it necessary to update the market it will do so by way of company announcements.

Lombard Bank is to ask its shareholders to approve a 2-for-1 share split as it looks to attract new investors by issuing new shares. Directors are recommending that each €0.25 share be split into two, each with a nominal value of €0.125.

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