Qatar slashes Barclays stake with £510m sale

IFR 2513 - 09 Dec 2023 - 15 Dec 2023
6 min read
Steve Slater, Owen Wild, Tom Hill

Qatar’s sovereign wealth fund has sold more than one-third of its stake in Barclays for £510m, marking its biggest sale of shares in the UK bank since piling in to help it avert a UK state rescue in 2008.

Qatar Holding sold 361.7m shares in Barclays in an accelerated bookbuild on Monday at 141p per share, a slim 1.4% discount to the 142.98p close. Bank of America and Citigroup were joint bookrunners on the offering. The shares fell to 136.5p the following day, but stabilised and were trading on Friday morning at 141.9p, barely changed on the week.

Qatar opted to run an auction of the stock among several banks, with BofA and Citi winning the trade and launching into the market at 5:10pm in London with guidance of 141p to the 142.98p close but they were unable to sell all the shares.

Two bankers involved said their residual positions were not a cause for concern. "We offloaded a good chunk [of stock]," said one of the bankers involved. "It’s a big liquid stock and the banks were comfortable with the amount [remaining]. It’s a perfectly manageable amount."

The placing represented about three days' trading volume.

A head of ECM not involved in the deal said there had been a rumour in recent weeks that Qatar might trim its stake.

Other senior bankers wondered about the wisdom of Qatar's decision to conduct an auction that resulted in the lead banks holding stock and caused Barclays shares to fall the next day, given the seller is a strategic shareholder of many years and retains a significant shareholding. The alternative is to select banks working on a best-efforts basis, potentially including a wall-crossing exercise ahead of launch if necessary, in an effort to ensure the shares were fully distributed and minimise impact on the stock price. Another head of ECM contrasted Qatar's approach with that of Singapore's GIC, which sold its crisis-era investment in UBS through the Swiss bank on the basis it was best placed to find buyers at the correct price.

Qatar Holding is a fan of auctions, which are often used by sellers who need to show they achieved the best price possible, having already auctioned blocks in French construction group Vinci in February and hospitality group Accor in May. Both of those were won by BofA on a sole basis.

A banker on the Barclays deal said there was demand from shareholders and new investors, with a mixture of long-only and hedge funds involved.

It appears to be the second major sale of shares by Qatar since the start of 2022, although there was some confusion about that fact and the size of the stake ahead of the sale, perhaps due to two different ownership entities being involved. Qatar Holding is owned by Qatar Investment Authority. Barclays said QIA owned 847.6m shares before the sale, giving it a 5.6% stake, after reducing the holding from 1bn shares in January 2022. Monday's sale represented 43% of the holding and left QIA with 486m shares, equivalent to a 3.2% stake, leaving it as Barclays' fourth biggest investor.

Barclays said in its last annual report, however, that Qatar Holding owned 1.017bn shares at the end of 2022 and indicated it had not sold any shares for years. The discrepancy could be explained by the SEC having stricter disclosure requirements than the UK Financial Conduct Authority’s disclosure and transparency rules.

Time to move on

Qatar Holding has pledged not to sell any more shares for 60 days, although the timing of the sale is a dent to Barclays' attempt to revive its share price.

"They’re a strategic shareholder selling half their position," said a banker away from the deal. "There’s a reputational question to be asked here."

"You have to think QIA has decided to move on," said a second banker on the deal.

The sell-down may also reflect a more negative stance on European banks from the sovereign wealth fund after taking a hit on Credit Suisse this year. QIA increased its stake in the troubled Swiss bank to 6.9% at the end of 2022, which made it the second-biggest shareholder before it was rescued by UBS at a knock-down price.

Barclays shares are down 11% this year and the bank is under pressure to improve returns and lift its share price. CEO CS Venkatakrishnan is expected in February to detail strategic changes, which are expected to include cutting costs by up to £1bn, diverting some assets from the investment bank and a pledge to buy back more shares.

The Qatar entities invested about £4bn in Barclays in two cash calls in 2008, which helped Barclays avoid having to take taxpayers' cash. But the investment has been dogged by controversy from the start and UK prosecutors charged three former Barclays executives with fraud related to the Qatari fundraising, claiming they arranged for secret fees to be paid. After years of legal wrangling and a four-month London High Court case, the trio were acquitted in early 2020.

Last year the UK’s Financial Conduct Authority fined Barclays £50m for failing to disclose certain arrangements agreed with Qatari entities as part of the 2008 fundraisings. The FCA said Barclays’ conduct in the October 2008 capital raising was “reckless and lacked integrity”.

Qatar was not accused of any wrongdoing. It bought its shares at an average price of 218p and Monday’s sale was at 35% below that price. Its loss from the fall in share price will have been cushioned by other instruments bought in the complex October 2008 fundraising, however, which included reserve capital instruments, warrants and advisory fees. IFR previously calculated that Qatar investors are likely to have made about £2.7bn from those other investments.

Qatar slashes Barclays stake with £510m sale