OPINION: First Republic investors are worried that the value of their shares and bonds will be either diluted or wiped out as part of any rescue plan for the troubled lender.
Investors have conflicting emotions about the 3 billion Swiss franc takeover of Credit Suisse by rival UBS orchestrated by Swiss authorities on the weekend.
And First Republic’s bonds are now trading around US55¢ on the dollar, compared with about US80¢ before the panic. First Republic is battling to shore up investor confidence amid torrential deposit outflows. So far this year, the San Francisco-based bank has lost about $US70 billion of deposits, or about 40 per cent of its deposit base.
But existing First Republic investors worry that any equity raising at present prices would greatly dilute the value of the existing stock.
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