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Crédit falls on pricing leak
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June 3, 1999: 8:24 a.m. ET
Certificates of French state-owned bank drop 13% on press report of IPO pricing
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LONDON (CNNfn) - Investors hoping to cash in on the privatization of French bank Crédit Lyonnais took a hit Thursday after a press report suggested the valuation of the initial public offering was well below its current market capitalization.
Non-voting investment certificates in Crédit Lyonnais, which are traded on the Paris bourse, slumped over 13 percent Thursday morning, after earlier being suspended limit down following a sharp sell-off at the open.
Investors were reacting to a report in the French business daily Les Echos, which suggested that the two banks advising the government on the sell-off had reached a valuation range between 39 and 46 billion French francs ($6.2 to 7.3 billion).
This valuation came in at a 30 to 40 percent discount to bank's market capitalization indicated by the certificates at close Wednesday. The non-voting paper accounts for 10 percent of the banks total capital and fell to 29.90 euros in late morning trading from a closing price of 34.53.
One Paris-based banking analyst, who asked not to be identified, said speculators had used the certificates to play both the restructuring and privatization of the state-owned bank over the past two years.
"It has been hard to get any true valuation of Crédit Lyonnais over the past two years and some people will be hurting today," the analyst said.
The certificates are highly illiquid, with half of those listed held by French insurer Assurance Générale de France and a hedge fund thought to be U.S.-based Tiger Management.
Bob Yates, head of research at London-based specialist financial brokerage Fox-Pitt Kelton questioned why the sell-off had been so long in coming, pointing out that the certificates had traded around 38 euros until recently. "The amazing thing is why we haven't had a crash in the price [of the certificates] before now. I haven't met anybody who could actually explain rationally why they were buying the certificates in the upper thirties," he told CNNfn.com.
Yates believed the leak was a deliberate attempt to bring the price of the certificates in line with the float price. "This was a completely stage-managed leak as part of the critical last phase towards privatization," he said.
Yates said the leaked figures were in line with his estimate for the offering price of 22 to 23 euros, which would value the bank at around 46 billion francs. This excludes a further 8 billion francs worth of shares that will be issued to the core shareholders, including those holding the non-voting certificates.
One source close to the offering told CNNfn.com that the price would be nearer 26 euros and said the final pricing would be announced in the next two to three weeks.
The full privatization is due to completed before the end of June. 
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Crédit Lyonnais
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