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Market baffled by 700pc rise in Bankia shares
Traders and analysts were left baffled on Tuesday after struggling Spanish lender Bankia briefly became the most valuable bank in the eurozone as its shares soared by more than 700pc.
The share price rise began just before 10am and in just over an hour Bankia’s market value had increased by 756pc. It then gradually fell back throughout the remainder of the trading session.
At its peak, the market value of Bankia reached €94bn (£79bn), close to the combined capitalisation of Spain’s two largest banks, Santander and BBVA.
Market observers struggled to explain the astonishing rise. Espirito Santo banks’ analyst Juan Pablo Lopez said: “It’s not very rational. I think some people must have got their maths wrong.”
Most analysts, including Mr Lopez, agreed that the rise was most likely the result of a so-called “short squeeze” whereby investors betting against a share price fall are forced to buy back shares they have borrowed from other investors after a price rise.
Bankia was formed just over two years ago through the merger of several failing Spanish savings banks as part of a state-backed bailout of the country’s financial system.
Since then Bankia has come close to collapse several times, last year requesting a €19bn rescue package as it was hit by new losses of more than €4bn.
Analysts at investment banks compared the dramatic rise in Bankia’s shares with the events surrounding Volkswagen’s share price spike in 2008.
On that occasion, the German car maker briefly became the world’s most valuable company amid speculation about a takeover by Porsche.