Fianna Fáil Spokesperson on Finance Michael McGrath has called on stockbrokers trading in AIB shares to bring to the attention of investors the high risk nature of any investment in the stock. He was speaking following two days of sharp falls in the AIB share price which has seen more than 25% knocked off the notional market capitalisation of the firm.
Deputy McGrath commented: “Many potential investors in AIB and other banking stocks look at the very low nominal share price that they now trade at and see a potential for huge investment returns. However, as has been pointed out in recent days, the company has a miniscule free float of just 0.2% and as a result a grossly inflated market capitalisation. Even at its reduced share price, the bank is still trading at a level far above the valuation placed on it by the National Pension Reserve Fund. The completion of a process of restructuring the company’s capital structure leaves small investors at the risk of further sharp losses. This point may be lost on non-professional investors who are considering purchasing the share price at this point.
“Many stockbrokers operate on an execution only basis, simply providing a share trading service for investors. This serves many investors well as it reduces their trading costs. However, the situation in relation to AIB and also Permanent TSB is such that their share price is so far out of line with the underlying value of the company, I believe there is an onus on stockbrokers to advise investors of this specific anomaly and allow them to adjust their investment plans accordingly. This can be done without placing any additional obligation on brokers to provide advisory services to clients who wish to trade on an execution only basis.”