Since the start of rights trading, Credit Suisse's share price steadily eroded, and the price of insuring its debt bond is shooting up. Observers see speculators at work.
Credit Suisse was unable to completely convince shareholders and investors with its messaging following its extraordinary general meeting at which the two-part capital increase was approved last week.
One market participant said the management team's statements following the meeting were too vague and not positive enough. It seemed as if Credit Suisse's legal department was in charge of communications, avoiding everything which could be interpreted as deceiving shareholders.
More Sellers Than Buyers
The strategy presented at the end of October left many unanswered questions, above all what will Credit Suisse look like in the future, what will remain of investment banking and in which direction should asset management go? It failed to provide adequate answers to all these questions.
Now, with the start of rights trading, another question arises. How many of the existing shareholders will exercise their subscription rights and subscribe to new shares? The price reaction in the share and subscription rights suggests that some small shareholders in particular prefer to part with their shares. «There are more sellers than buyers on the market,» as traders like to succinctly put it.
Share at All-Time Low
Currently, the stock is quoted at 2.86 francs, reaching a new all-time low in intraday trading Wednesday at 2.858 francs, a decline of around 13 percent from Friday's closing prices. Credit Suisse's shares started the year off at around 9 francs.
The subscription rights are trading at 10.3 centimes, and moving in step with the current and issue-price differential of the new shares of 2.52 francs, which is the subscription rights price times 3.5, plus 2.52 francs.
New Levels of Fear
According to a «Bloomberg» (behind paywall) story, credit default swaps (CDS) for Credit Suisse's bonds are experiencing high volatility, with spreads jumping over 400 basis points. For comparison, Deutsche Bank's CDS is 110 basis points.
«The big spread is mainly technical,» Guido Versondert of Zurich-based research boutique Independent Credit View (I-CV) tells finews.ch. «There is an imbalance between supply and demand,» he adds.
To be sure, the CDS spread could be seen as a warning signal, but he warns about over-interpretation. Due to the small number of players, who then also often have to operate within fixed limits, large swings can occur, with the volatility, in turn, attracting speculators.
«When there is blood in the water, the sharks appear,» he says.
