Will investors in Bankia get their money back?

Bankia IPOMonths ago we analyzed in this blog the possibility that small investors are being scammed for a financial and banking system whose top officials have gone unpunished (and millionaires) after devastating the economy of this country. In this article I will analyze one of the most controversial IPOs in recent years, the Bankia IPO, in which many small investors are trapped with losses that probably, as we will see, they will never recover.

Bankia's IPO, a trap for unsuspecting savers

Bankia's IPO is involved in a major media campaign to try to capture the savings of Spanish society. Here are a couple of examples of advertisements encouraging unsuspecting investors to become "bankers."

[youtube http://www.youtube.com/watch?v=Ytty167-lC0]

[youtube http://www.youtube.com/watch?v=QQH6vb-GsJ0]

Bankia's share was listed on the Madrid stock market at a price of 3,75 euros per share. What happened from that moment? Now we will analyze it.

The current price of Bankia and the one it would have to have for bankers to get their money back

Bankia's share is currently trading at a price per share of 1,068 euros, at the closing price of November 8, 2.013. As the IPO price was 3,75 euros per share, we might think that the decline in Bankia shares is around 70%, which is a big drop, but could recover over time. However, it should not be forgotten that Bankia had to carry out a counter-split of 100 against 1, that is to say, a corporate operation that consists of each group of 100 shares becoming only 1. Therefore, the reference value It is not 3,75 euros, but 375 euros for the effect of the counter-split.

The current loss stands at 99,715%, which means that a saver who invested 10.000 euros in Bankia in the IPO, now only has 28,48 euros left. In other words, he has lost practically everything. In the following graph you can see the evolution of Bankia on the stock market:

Graph of Bankia's evolution since its IPO

According to capitalization bursátil of about 12.300 billion euros.

Next we will analyze how much Bankia would have to be worth for investors in the IPO to recover their money, seeing this figure in perspective.

The hypothetical value of Bankia for bankers to get their money back

Taking into account the number of Bankia shares and assuming that it will not have to carry out new capital increases in the future, for the Bankia share to recover its original value, its market value would have to reach 4.318.998 million euros . This figure is more than 350 times the current market capitalization of the company. In other words, Bankia's share would have to rise 35.112% for shareholders to recover their investment, reaching the required 4.318.998.000.000 euros.

To analyze this figure, it is better to see it in perspective by comparing it with the market capitalization of other important Spanish and international companies and with the Spanish GDP for the year 2.012:

Bankia's market capitalization in perspective

Bankia's market capitalization in perspective

As you can see, for bankers to recover their money, Bankia would have to become the largest company in the world by market capitalization, with a size more than 9 times larger than Apple and more than 4 times larger than the Spanish GDP of the year 2.012. In other words, it will be practically impossible for investors in Bankia to get their money back.

What lessons should we learn from the collapse of Bankia?

My advice is that, if you want to get a return on your savings, opt for one of these two alternatives:

  • Learn to invest and do it on your own.
  • Hire an independent financial advisor to help you with your task.

What I would never recommend is to trust the bank to invest your savings. I leave you a phrase that the head of a branch of a major bank told a friend who worked in that same branch in a discussion about the type of products most suitable for each client:

"What is good for the bank is not always the same as what is good for the customer"

Other examples of bad banking practices in financial advice can be found in the book "The guilty bank" by Pau MonserratI have already given you my opinion on the web and that I recommend you to better understand the dark side of banking.

I hope we can all learn this lesson that has come so dear to so many small investors. I also hope that justice is served and that the investors who have been deceived will get their money back, although unfortunately I see this as somewhat difficult.