UBS offers to buy Credit Suisse for up to $1B
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1/7 of the Friday closing price - this is heading into the Matt Levine "we will buy your bank, make sure that all your customers are made whole, and give you a Snickers bar in exchange for 100% of the equity" territory
Is there such a mechanism in Switzerland? Because at "a snickers bar", a lot of people wouldn't sell out even though it's better for all their depositors. They may be tempted to roll the dice and hope for a giant win. After all, they get way more upside and it's not their money (primarily) they are risking
The mechanism for "getting paid with a snickers bar" is just a streamlined but still fair version of a restructuring bankruptcy. In a bankruptcy all of the equity gets wiped out and the shareholders no longer have a say in the matters. Morally because they failed to run the company, but also because they positioned themselves to take the greatest gains, and thus should be exposed to absorb the greatest losses. It's not so much specific to any country as it is to the very idea of capitalism / being a shareholder.
The fact that a banking regulator gets involved and orders this or that does not necessarily change the fundamental way in which things would happen to another non-bank corporation. Equity would get wiped out, sometimes together with the least secured credit - see "fulcrum security".
All-In Podcast said that a plausible reason for the Saudi Arabian investor capping at 9.9% was due to government regulations. Deep link : https://www.youtube.com/watch?v=yYwfiqYocc0&t=11m20s
That said, I have no idea if the government rules about owning more than 10% is just a minor inconvenience or A Really Big Deal.
Matt Levine is a treasure.
Wish I could be that deliberately malicious and get promoted for my efforts.
At this point if there is no deal by the end of the day the government is considering taking parts or the entire bank[1]. Although this would be a huge hit for the tax payer, at this point I think it would be much better. The Swiss government can also push back harder on any future liabilities that come at the bank from old dealings. By nationalizing the bank they will effectively prevent a global financial crisis.
If UBS acquires this bank a lot of jobs are redundant and there is effectively only one large bank left.
The Bundesrat[2] is expected give a media conference later today.
[1] https://www.bloomberg.com/news/articles/2023-03-19/switzerla...
When I worked with CS they had a mountain of corporate entities. Just dozens of businesses that were pretty hard to do paperwork for, and even as a going concern it was confusing. Now with bankruptcy eminent, it is not any easier to know what is where.
I get this feeling they actually have no idea what CS has in terms of assets and liabilities. This is why UBS has that clause about the CDS, if they buy the bag of junk there could be some bomb inside it.
My brother was brought in to work exclusively on backups and to wrangle 13 different IT teams doing backups into compliance. They made sure that he didn't get his laptop to start doing his job for a full six months. Every department's backups failed every day. Every department had excuses for not being able to do the remediation work. After a couple of years of collecting a paycheck and making no progress he left and used the money to start his own business.
I still wonder how much progress they have made to this day.
Sounds like they want a way out of this deal.
Sad to see such a long-standing global company end like this. Credit Suisse suffered from years of terrible leadership and bad decisions so I suppose this is preferable to just an outright collapse.
Such offer by itself would probably be enough to drive the share price given where things seems to be headed.
1. The market considers that in the future the company will be worth (on avg) $8B.
2. There is a 20% chance the company is (effectively) dead in a month.
- these statements are not necessarily in contradiction (although going one level deeper, I personally think catastrophic risk is often not fully reflected in asset prices)
Market expectations are based on facts.
> the downfall in unpredictable.
Yeah! Unpredictable is a synonym for surprising. I think you're agreeing with me? It would be surprising if CS stock went from $8B to $1B overnight.
Market expectetions are not based on facts, that is the lie that keeps catching the people with their pants down. Market Expectations are a Bet of Risk/Award analysis based on limited data (thus at best limited at worst even distorted or ommited facts). There are always people willing to bet on the x3 or even x10 as long as the risk/award analysis is attractive. It is by no means a statement that you will win x3 or x10.
Cryptocurrencies are the perfect illustration of this effect but even in the regulated market see for example the illustration of the Gamestop: https://www.theverge.com/22253363/wall-street-bets-verge-sto... it's perfect to show how the market expectations are bullshit and not facts.
I mean, I just disagree with you there. Outcomes you did not predict are surprising.
The Fed's got our back, lets try crypto and see how that goes.
Just have to repeal that pesky Dodd-Frank thing, and it's back to the fuckery.
This part of the article is horrifying.
Switzerland has bank insurance, but it's not government-backed. It's funded by the banks as a group. The limit is 100,000 CHF (about US$108,000) per customer. Swiss banks are not, in general, backed up by the Swiss government in the way that the FDIC and Fed back up US banks. It's surprising to see a "too big to fail" approach from Switzerland.
But if Switzerland let Credit Suisse go under, nobody outside Switzerland would put money in Swiss banks any more.
Switzerland’s private banks are fine. Problem is CS does a lot of plumbing, in Switzerland and internationally.
[1] https://cdn.unitycms.io/images/19gT0AyGKZW9w8bI-N6GQe.jpg
[2] https://www.cash.ch/fp/1335/751/2016/1512/sites/default/file...
It's not just some widget factory, it has connections all over the world but ofc also quite a lot in Switzerland itself. You don't really want one of your two biggest banks to cease trading.
Their CEO can just turn this into a game of chicken, since it is the depositors who are at risk, not him
And if the sale is being forced, why even offer $1 billion? Just threaten jail time and take CS for free
They don't get to say no
Once again, it makes sense for CS to let this go scorched-earth
Intentionally producing a worse outcome for your own shareholders in the hopes you can blame someone else just doesn’t seem like a very sane thing to do.
God, this world has so many corrupt companies in it.
Like the London Whale (£3Bn??) for JP Morgan and countless other examples
Will the Swiss start selling arms to the Ukraine to make up for this lost capital?
>Saudi Arabia's National Bank, which acquired 9.88% of Credit Suisse shares last year, said it would not buy more shares on regulatory grounds.
>"We cannot because we would go above 10%. It’s a regulatory issue," Saudi National Bank chairman, Ammar Al Khudairy said on the sidelines of a conference in the Saudi capital, Riyadh, on Wednesday.
>Al Khudairy said the value realisation of that investment will unfold as the Swiss bank proves they are doing the turnaround.
>"We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank," he said.
>"I don't think they will need extra money; if you look at their ratios, they're fine. And they operate under a strong regulatory regime in Switzerland and in other countries," he told the Reuters news agency.
His comment will go into the history books for shutting up when your money is on the line.
>His comment will go into the history books for shutting up when your money is on the line.
He didn't just say "for regulatory reasons." He started with "Absolutely not" and it almost sounds like he added the regulatory part because he realized he screwed up: https://youtu.be/q0So9sqLLfY?t=127
Pasting the key takeaways portion:
> - A principal shareholder is a person or entity that owns 10% or more of a company's voting shares.
> - Principal shareholders have significant influence over a company, allowing them to vote on appointing the (CEO) and board of directors.
> - A principal shareholder is different from a majority shareholder, which is a person or entity that owns 50% or more of a company's shares. Principal shareholders are subject to special Securities and Exchange
> - Commission (SEC) filing rules that pertain to insider trading.
It'll be curious what the Swiss government does about employee retention in the forced marriage.
So the chances of there being another interested party are ... low.