Not so Fortis: share price falls to €1.2

After a weeklong suspension and the release of “non-audited pro-forma figures“, Fortis trading resumed on Tuesday, sparking a massacre: Fortis Euronext shares fell a whopping 77% to €1.2 euro. At the investment club conference last week – after the BeNeLux nationalization but before the BNP Paribas takeover – Fortis shares were estimated at a value between €3 to €4. In its “new constellation”, Fortis plans to focus on global insurance.

Fortis also announced that it was planning to call a shareholder meeting in eight weeks. I would give good money to attend this meeting because investors are outraged over what they see as “mismanagement” and “misinformation”. Lobbygroup Fortisaction.com argues that shareholders are left with:

• a marginalised company with a 66% stake in a structured products portfolio (worth 6,8 billion euro)
• a small insurance business that could not be sold directly (Insurance International) worth between 1,5 and 2,0 billion euro.
• no dividend
• a 90 percent decline in the shareprice.

Fortis trade suspended until fog clears

The shit has hit the fan. The CBFA, Belgium’s Banking, Finance and Insurance Commission has reportedly suspended Euronext trading of Fortis shares until the market can adapt to the BNP Paribas takeover. No official press release confirming this news could be found on the CBFA website at this time. Lame.

Ready, steady, scramble

**UPDATE (22:30): BNP Parisbas to acquire Fortis (DT)**

According to a report in business newspaper De Tijd, French bank BNP Paribas has come to terms with Belgian and Luxembourgian authorities regarding the takeover of Fortis. The French takeover is reported to consist of two operations: the Belgian government would first complete the nationalization of Fortis (purchasing the additional 51% for 5 billion euros) and then sell a 75% majority share in Fortis Bank Belgium to BNP Paribas. Instantly, the French bank becomes a major (and new) player in Belgium, while the Belgian government becomes the largest minority shareholder (25%) in BNP Paribas.

**UPDATE (21:15): (unofficial) BNP Parisbas nets majority
share in Fortis Bank Belgium and Luxemburg (DS, DT)**

First Belgium, now Iceland, the UK and Germany are scrambling to save their economies from collapsing. What’s next, OJ Simpson behind bars? Oh wait.

Flemish investment club shindig

All eyes were set on Filip Dierckx, Fortis’ newest CEO, at the annual Flemish investment club conference in Antwerp today. Alas, Fortis cancelled at the last minute, sending apocalypse rumors and cholesterol levels flying.

This was an eye-opening day among corporate high rollers, financial analysts and frustrated investors. As I mingled with attendees and exhibitors during coffee breaks, I was casually told that it used to be fairly easy to make your first million on the stock market – yes, I kept the Lil’ Wayne jokes to myself – and that, as an entrepreneur, cornering a niche market is key. Just ask Omega Pharma.

(research mode: on) The CEO and CFO presentations provided rich arenas for displaying competence and illustrated, at least to this investment novice, how crucial the interpretive work of the audience (nodding, taking notes, asking questions, chatting) is in acknowledging and enacting the speaker’s expertise. These performances are research grants waiting to be written (research mode: off).

Lessons learned: Zetes is, IMHO, a company with killer technology and a sound business plan. KBC is sitting pretty for now. The art of public speaking is not exactly lost on Agfa Gevaert CEO Jo Cornu. Eyes-on-stalks boring. And Fortis? They’re in rocky waters. Expect more drama soon. In the meantime, roll with the punches. And please don’t make a run on it.

Prime Minister: Fortis to be dismantled

At a press conference earlier today, Belgian Prime Minister Yves Leterme announced that the Fortis banking and insurance concern will be dismantled. Belgium will acquire Fortis Bank Belgium and the Netherlands have agreed to purchase ABN AMRO and Fortis Insurance The Netherlands for 16.8 billion euros. Luxemburg is expected to follow suit by nationalizing Fortis Bank Luxemburg. (Source: De Tijd, De Standaard).

The firm-investor communication process

Timely article in the latest issue of the Journal of Business Communication. In Are Investors Influenced By How Earnings Press Releases Are Written?, Elaine Henry examines the market impact of earnings press releases (EPR). Following a qualitative survey of EPR genre features, the impact of tone (communicative affect) is quantified using content analysis and event study methodology. Event studies are commonly used in accountancy (capital markets) research and assess event impact on company stock price. Based on a  large sample of telecom and computer industries EPR, Henry’s findings suggest that:

a) investors are influenced by EPR tone;
b) EPR length negatively influences market reactions and;
c) numerical intensity diminishes EPR market impact

In financially critical times such as these, I wonder how the language used in press releases affects investor sentiment. For instance, the press release Fortis issued a few days ago was clearly intended to boost investor confidence but I think the overly positive tone indexed (warranted) fears of a bank run and hence did more damage than good.

Henry, Elaine (2008). Are Investors Influenced By How Earnings Press Releases Are Written? Journal of Business Communication 45 (4): 363-407. DOI: 10.1177/0021943608319388

BeNeLux authorities nationalize Fortis

**UPDATE (11:53): Fortis issues press release,
shares continue slump, Dexia shares plummet**

De Tijd and The Standaard are reporting that the national governments of Belgium, The Netherlands and Luxemburg are set to become 49% minority owners of Fortis banking divisions in the BeNeLux region. The rescue operation will cost the taxpayer 11.2 billion euros. Fortis will sell off ABN AMRO shares to the highest bidder.

Fortis CEO leaks emergency scenarios

**UPDATE (11:30pm): Belgium, Luxemburg and
The Netherlands to nationalize Fortis (De Tijd)**

In a story that’s getting juicier by the minute, this picture was taken as newly appointed Fortis CEO Filip Dierckx entered the Wetstraat 16 – the Flemish equivalent of 10 Downing Street – for emergency talks about the future of troubled Belgian-Dutch banking and insurance group Fortis. The picture outlines the emergency scenarios currently on the table. An official announcement is expected to be made later tonight.

According to the document, Fortis will sell its nail-in-the-coffin ABN Amro assets, which it had acquired for 24 billion euros, to ING for 10 billion euros. In addition, Belgian and Luxemburgian authorities are to invest 7 billion euros in Fortis. Dutch authorities may also invest. And last but not least, Maurice Lippens is to resign from the Fortis Board of Directors.

Sources used in this blog post: De Standaard, De Tijd