Taxpayer could get 60% stake in RBS after investors shun fundraising bid

26 November 2008 / by Rachael Stiles
It's looking like the taxpayer will be left with almost 60 per cent of Royal Bank of Scotland after its shareholders have shunned a fundraising effort and the Government agreed to take up any left over shares.

RBS has not released exact figures on the number of shares the Government will take up, but it is expected to leave the taxpayer with a loss of £2.8billion because the Government will pay 65.5 pence per share – compared to the 53.6 pence they closed at last night.

RBS launched the share sale as part of its bail-out from the Government's £37billion rescue package for the banks. It will receive £20billion of Government funding, consisting of £15billion of ordinary shares and £5billion in preference shares.

The £15billion share offer closed yesterday with the shares well below the offer price and the bank's directors are thought to be the only takers, which leaves the Government, and the taxpayer, with 58 per cent, partly nationalising the bank.

In June, the bank launched a record £12billion rights issue, at 200 pence a share, which 95 per cent of investors flocked to. Its new fundraising record is £15billion, £5billion of which will be bought by the Government in preference shares and must be repaid before shareholders can be paid dividends.

When its shares were at their peak last year, RBS was valued at £60billion, but it is now worth less than a tenth of that figure.

Having taken a beating since the credit crisis worsened, shares in RBS have risen 31 per cent in the last week, but the bank was unlikely to attract investors in their droves at the price of 65.5 pence it was asking for each share.

Leading the RBS board, chairman Tom McKillop has said that they will take up their investment stakes, suggesting that they will also take a hit by paying over the odds for the shares; collectively the bank's board members own about 3.2 million shares.

Even though the taxpayer faces losses in the short term, analysts have set a 100 pence target for RBS' shares, which could represent a profit of almost £8billion for the bank's majority stakeholder.

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