UBS investor upsets shareholders

Scott Jagow Dec 21, 2007


Scott Jagow: For a while, I was telling you every day about a huge bank loss because of bad mortgage debt. Now, it seems there’s a big foreign investment in one of those banks every day. This morning, it’s Merrill Lynch. The Wall Street Journal says the bank might get $5 billion from the Singapore government.

At the same time, we’ve learned the identity of a mystery investor in the Swiss bank UBS. It’s Saudi Arabia, according to The Financial Times. UBS shareholders are not happy with this deal.

We’re joined now by Haig Simonian, who covers UBS for the Times. Haig, why are they so upset?

Haig Simonian: I think shareholders are probably resigned to the fact that the bank needs extra capitol. But shareholders are upset because in bringing in these new investors — whether it’s the government of Singapore in the one case, or the mysterious investor who has now been identified as being from Saudi Arabia — that’s to the disadvantage of existing shareholders. So in other words, your shares aren’t going to be as valuable as they were before, because new shareholders are coming in and taking very big stakes.

Jagow: Well as far as we know, UBS shareholders are the only ones that are complaining so far. We haven’t heard a peep out of a lot of the other banks.

Simonian: Yeah. The problem in Switzerland with UBS isn’t nationalistic, it’s not protectionism. It’s more I think UBS shareholders had believed until now that their bank was, I don’t know, the real blue chip in the pack, one of the world’s best-run banks which had a reputation for being extremely risk-adverse. Suddenly, it turns out in a matter of months that that institution run up $40 billion worth of subprime portfolios doing their business.

Jagow: What are shareholders at UBS doing about this? Anything?

Simonian: A mixture of things. One group, a lobby here in Switzerland, has said at the very least, give us more information. A second group has said we vote against this, because the deal you’re offering is so attractive that it’s to our disadvantage.

Jagow: OK. Haig Simonian with The Financial Times in Zurich, Switzerland. Thanks for joining us.

Simonian: It’s good to be with you.

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