The Barclays share price suffered a 2.4% drop yesterday after one of the bank’s biggest investors offloaded its 3.6% stake in the bank. The shares were sold for around £900 million a day after Barclays announced an embarrassing error that is likely to cost it around £450 million at the best guess and has delayed a planned £1 billion share buyback scheme.
The error revealed over the weekend relates to Barclays’ 2019 limit for the trade of structured notes and exchange-traded notes, it was registered to sell in the United States. Limits are agreed upon in advance between registered sellers and the U.S. Securities and Exchange Commission and Barclays’ was $20.8 billion. The bank, however, overshot that by almost $15.2 billion.
The mistake relates to sales of two exchange-traded notes, VXX and OIL, linked to market volatility and crude oil prices, respectively. Barclays will now be obliged to buy the securities back at present market prices, which it expects to lead to a £450 million loss. The bank said it reported itself to the SEC on discovering the error which has reportedly been called “a ridiculous own goal” by another major investor.
The sale of the significant stake by the as yet unnamed investor was announced to the stock market on Monday night and completed this morning. There are only a small number of institutional investors with stakes large enough to have been responsible for the huge sale that saw 599 million shares offloaded at 150p each – BlackRock, Vanguard, Capital Group and the Qatar Investment Authority.
They have all declined to comment but reports suggest City insiders are confident the seller was the American investment giant Capital. The identity of the seller can be expected to be made public over the next few days as large changes to shareholding are usually disclosed to the market. The sale was handled by the American investment bank Goldman Sachs.
The error is particularly concerning investors due to its simple nature calling the bank’s internal controls, systems and general organisation and management into question. The Times newspaper reports the fund manager behind a top 20 Barclays investor commenting:
“It’s a bit of a ridiculous own-goal. It’s just simple, basic stuff to get wrong. It’s terrible really.”
Another top 20 investor reportedly told the newspaper “it obviously asks questions about the control environment.”
The share sale was made at a 6.5% discount to Monday’s closing price.