*pundits are now saying that Sovereign Wealth Funds are going to be the M&A capitals of the world to lead us out of the doldrums. But they are in bad shape and cashing out of their positions. Let the fun begin..
Big Investors Cashing Out Of Bank Stocks Could Kill Share PricesAbu Dhabi investors plan to sell their stake in Barclays (BCS) for about $6.8 billion. They have only had the shares a year but their return is likely to be more than 50%. The news pushed shares in the British financial firm down by nearly 20%.
The action raises the question of how quickly shareholders with positions in other large banks will take the exit door to lock in gains.
Saudi Prince Alwaleed bin Talal has a 5% stake in Citigroup (C). He has lost money on the position, but the bank’s shares are up 200% in the last three months. The Prince, a Citi shareholder for years, may fell that the return is good enough and that it is time to sell his investment.
Singapore state-owned Temasek Holdings lost a great deal of money on its investment in Merrill Lynch. It might have done better if it had held on to the investment after the Bank of America (BAC) transaction. BAC shares have rallied significantly since. March. The Kuwait Investment Authority also owns a large number of shares in BAC. It may decide that the stock will not go much higher over the next year.
Global money center banks are about to find that they are victims of their recent successes. With share prices that are, in most cases, more than double what they were ten weeks ago, large investors may start cashing in, and that could bring the stocks down significantly from their current levels.
Douglas A. McIntyre
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