Shares in Monte dei Paschi di Siena failed to start trading at today's opening as Italy's third largest bank launched its second rights issue in less than a year to repair its balance sheet.
The Tuscan bank is raising €3 billion from investors - more than its market value, which stood at €2.44 billion at the end of last week.
It is selling 2.56 billion new shares to fill a capital shortfall identified in last year's pan-European banking review by the European Central Bank.
The offer is for 10 new shares at €1.17 per share for every existing share held. The rights to buy into the offer can be traded until June 8 and can be exercised until June 12.
The terms of the offer imply a theoretical ex-rights price for the shares of €1.92 a share based on the stock's closing value on Friday, and a price for the separately traded rights of €7.50 for every 10 new shares.
The indicative price of the stock was at €2.306 in early trade - a 20% rise, with bid orders totalling more than 3,000 times the size of selling orders.
However the rights to buy into the share issue - which also failed to start trading but according to analysts are the true indicator of the market response to the share offer - were indicated at €6.50 euros, implying a 15% drop on the valuation.
Capital increases usually trigger a fall in the price of shares.
However in the case of Monte dei Paschi, the large dilution effect, with shareholders who do not buy into the rights issue seeing their stake diluted by 91%, distorts trading in the stock.
That happens because derivatives contracts on Monte dei Paschi shares as of today take into account the much bigger number of shares which will we available only at the end of the capital increase, creating an artificial shortage of shares, traders said.
The same happened when Monte Paschi tapped markets with an even bigger and more dilutive 5 billion-euro rights issue in June last year.
Market regulator Consob had warned on Friday of the potential for an excessive rise in the ex-rights share price during the offer period.
