Santander acquires Popular: what about investors?

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Fue un secreto a voces en los últimos años y al final ha cristalizado una operación de enorme scope financiero y contable. El banco que preside Ana Patricia Botín tomó definitivamente el control del Banco Popular. Mediante un movimiento en el que participan diferentes figuras, from its clients to shareholders. All this, after the financial institution collapsed in the equity markets until its shares reached a value of 0.20 euros, at historical lows.

From this general scenario, the corporate operation has not surprised a good part of the financial analysts who saw this alternative as the only solution to Popular's serious liquidity problems. With very relevant falls in recent weeks and that has led its shareholders to lose a good part of their savings. Even when it will be worse for those who still held in value. Because effectively, as a result of this measure will lose 100% of invested savings. In other words, if you are one of these shareholders today, the value of your shares will be zero.

It cannot be forgotten in any way that so far this year, the entity accumulated drops greater than 70%. With serious losses for all its investors. Even for those who have taken positions in some areas of their most relevant falls in the markets. With incessant rumors in recent days about a withdrawal of Bankia for control of the bank and that it has definitively concluded with the purchase by Santander. This is a new scenario in national banking.

Purchase by Banco Santander

The lack of liquidity has been the trigger that has accelerated the movements in the banking sector. In conclusion, Banco Santander has opted for the acquisition of Popular through the Single European Resolution Mechanism (SRM) for one euro given the unviability of the entity and the evident risk that today could not meet the payments derived from his cash. Not surprisingly, one of the reasons given is that it will not have enough liquidity to open its branches.

To this end, it must be remembered that Banco Santander and BBVA They were the only entities that participated in the auction that took place on Tuesday night to buy Banco Popular, according to sources from the Ministry of Economy. At a time when the financial group had already been intervened by the Single Resolution Board (SRB) of the European Union. Previously, Bankia had also been informed that he was interested in the operation, but his intentions are yet to be carried out.

Endorsed by community authorities

Sea cual sea el caso, consiste en una operación financiera sin precedentes en la zona euro dado que es la primera vez que se produce. Al punto que constituye la primera intervención en el sistema bancario de la Unión Monetaria (UE). No obstante, cuenta con la aprobación absoluta de las organizaciones comunitarias. No en vano, rapido the European Central Bank (ECB) decided to support this important measure to clear any doubts about the application of this controversial decision.

To this end, the National Securities Market Commission (CNMV) has decided to suspend the listing of Banco Popular shares, even though the market had already discounted one of the most negative scenarios that could be expected. Where the only possibility that investors will have from now on will be to sue the entity or, failing that, the previous bank managers. In his only way to try to correct this serious problem that occurs from now on.

With capital increase in progress

Whatever the case, it will be necessary to carry out a capital increase of 7,000 million euros in the coming months. With a negative effect on the action of the Cantabrian financial group that will foreseeably lose value in the coming days. To this end, the Santander share has closed with a depreciation of 0.88% in line with other values in the sector, including European banks. Right now its shares are trading at 5.75 euros. So far this year it presents a revaluation of 16,96%. Conforms as one of the highest income values in the national selective index.

La reacción del ejecutivo nacional ha sido positiva en cuanto se conoció el nuevo escenario de la banca española. En la medida en que ha demostrado que la operación se ha realizado sin usar fondos públicos y «sin un factible contagio entre riesgo soberano y bancario, como sucedió en el pasado». Sea cual sea el caso, es una noticia de gran relevance what affects a lot of people, and where the most affected - by far - are the current shareholders of the now defunct Banco Popular.

Shareholders lose their savings

One of the clearest effects of this procedure is that Popular shareholders lose all the money they had invested in the listed company. Not in vain, the shares have been amortized in the operation, with which they have basically lost value. Or what is the same, it is zero. This affects about 300,000 investors that today were positioned in value. Specifically, around 62% of them were holders of less than 1,000 titles. From these data, the conclusion is drawn that a large part of the shareholders are small and medium investors and not large endowment funds.

Whatever the case, several law firms are already advertising legal measures de estas persons para intentar recuperar el dinero invertido. A tal efecto, tanto la institución financiera como sus exdirectores podrían enfrentar juicios por parte de los accionistas. Aún cuando de momento queda por verificar la viabilidad de esta iniciativa. Sea cual sea el caso, no se anuncia que sea de corto plazo, sino que requerirá el paso de un tiempo razonable para iniciar los juicios. La única esperanza para los minoristas es que de ahora en más se establezca algún tipo de mecanismo para compensarlos por la última expansión, como sucedió hace unos años en el caso de los preferidos.

Other important victims of this banking procedure are the bondholders. In other words, investors who have contracted bonds from this financial institution. Well, in this circumstance they will also lose all the savings invested in this financial instrument, and as investors in the stock market. Fixed income is a model of investment in fixed income, but it is not without risk, as has been demonstrated on this occasion.

The savers of Popular Seguro

The entity's savers, on the other hand, will not be affected by this new scenario. Because in effect, those people who have contracted savings accounts, pension plans, investment funds or even time deposits should not fear for their financial contributions. In reality, the new duel (Banco Santander) will take over all these financial operations. As a result of them, clients will not lose a single euro of these financial instruments. It is the other side of the coin involved in this intervention.

At the same time, they will be backed by the brand of a truly solvent financial group. Not surprisingly, other cases have developed in which similar events have emerged that have never affected savers. To this end, it must not be forgotten that depositors are covered by the Deposit Guarantee Fund (FGD), and whose purpose is to ensure deposits in money and securities or other financial products constituted in credit organizations. For a maximum limit of 100,000 euros for money deposits.

What about Santander investors?

Regarding the other part of the currency, in other words, Santander shareholders, for the moment these corporate movements do not have why affect them. The fact that your actions can be plunged into a period of greatest volatility. To the point that a greater difference can be generated between its maximum and minimum prices. More than in other periods this year. But there should be no sudden movements in its price, as warned by some of the most important analysts of the financial markets.

Another very different thing is what can happen when the dates of the capital increase approach. This is where it is somewhat normal for the stock price to go down. As a result of dilution effect of this financial procedure. Where it can not even be ruled out that its valuation will return to the level of four euros per share. It should not be forgotten that investors do not see extensions well. Periods in which sales are clearly imposed on purchases.

All these movements will be generated in the short term. While in the medium and long term the investment approaches will remain the same as until now. Even reinforced by the greater presence of Banco Santander in the vast Spanish geography.