Shares price crash

The recent share bonanza announced by Bank of Valletta invited trouble for all the bank's shareholders. After receiving one free share for every five shares held, the stakeholders rushed to convert shares into cash, placing thousands of shares for sale on the Malta Stock Exchange.

This enormous supply drove the share price down considerably and over just a few days of trading, the price crashed. The bonus bonanza was wiped out. Good luck to those few who managed to sell and get out in time but the vast majority of loyal shareholders remain stuck with the extra shares at an unattractive price level.

This situation was predictable, keeping in mind the small size of the market, restrictions in trading volumes and the absence of institutional players.

The evident lack of share support by the mother company caused the free fall and encouraged speculation. In lieu of free shares, a much higher one-off dividend pay out would have been more appropriate. A good lesson was learnt by all.