An investor based in London has urged the European Central Bank (ECB) to halt a €2.5bn rights issue at Italian bank Monte Dei Paschi di Siena (MPS), reported Financial Times.
Law firm RPC, representing the global investor that has operations in UK and US and holds an interest in MPS, stated in a letter to the ECB supervisory board that the Italian bank is indirectly purchasing its own shares in the offering.
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This letter, dated 25 October, was seen by the financial daily.
The Italian bank is paying a fee of €125m to eight underwriters on the capital raising. This fee is reportedly seen to be high.
The Italian state had committed to purchase 64% the issue, while other investors have guaranteed to purchase much of the rest.
The letter read: “It is unclear, to say the very least, that a private investor in the position of MPS would provide an underwriting fee of such a scale to others in order to ensure the purchase of unsubscribed shares, and directly or indirectly contribute to the purchaser.”
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By GlobalDataRPC termed this capital raise as “unlawful, the ECB’s authorisation of it should be withdrawn and the rights issue itself should be halted”.
It also stated that the rights issue was “significantly undersubscribed and can only be completed with the assistance of the underwriting fee”.
The law firm neither disclosed the identity of its client nor stated whether the investor had a short position in MPS’s stock.
The ECB, however, did not comment on the letter.
A person familiar with the matter said that officials are expected to reject the investor’s demand.
In September, MPS received approval from the ECB to raise capital despite uncertain market volatility.
Earlier this month, MPS commenced the share sale to secure as much as €2.5bn.
It was also reported that France-based insurance major AXA was looking to invest at least €100m in Italian banking group MPS.
In August, MPS reached an agreement with trade unions to cut thousands of jobs. This will see 3,500 employees voluntarily exit through an early-retirement scheme.
