European justice guarantees that large investors can claim for Bankia's IPO

Qualified investors who attended Bankia’s IPO can claim in court alleging wrong information in the public offering of shares prospectus. This is what the Court of Justice of the European Union has established this Thursday, which considers that when there is a prospectus, “a civil liability action should be able to be initiated for the information contained,” whatever the condition of the investor who is considered harmed ” . Thus, Luxembourg equates its rights with those of retailers.

The case, which dates back a decade, is well known. In 2011, Bankia made a public share subscription offer with two different tranches: one for retail investors, company employees and administrators, and a second tranche, the “institutional” one, for qualified investors, the large ones. One of the qualified investors, Unin Mutua Asistencial de Seguros (UMAS), signed a purchase order for 160,000 shares at 3.75 euros each, a total expense of 600,000 euros. But after the Bankia problems and the reformulation of the accounts, the shares lost almost all their value and the securities ended up suspended from trading

The UMAS went to the courts asking that the purchase of the shares be canceled “due to an error in the consent” and, in the alternative, wanted Bankia to be held liable for lack of veracity in public information. The process went through a court of first instance, which gave the reason and ordered the return of the investment, but did not say anything about the subsidiary responsibility of the entity. Subsequently, the Provincial Court, in the appeal, dismissed the invalidity of the purchase, but instead it was estimated that Bankia was responsible for the controversial brochure.

Bankia went to the Supreme Court on appeal, knowing that the high court had previously ruled stating that the IPO prospectus was plagued by “serious inaccuracies regarding the true financial situation of said company.” But The Supreme Court had doubts as to whether a qualified investor, such as the UMAS, can exercise this action of responsibility. The prospectus can be a decisive element and even the only one for a retailer and even an employee, but professional investors, the big ones, have more knowledge and information and Bankia’s thesis is that they hardly embarked on massive purchases just for the brochure.

The Supreme Court affirmed that neither the Directive nor the Spanish legislation “expressly regulate the possibility that qualified investors demand liability from the issuer for an inaccurate prospectus when a public offering of mixed subscription is made.” The European Directive, in fact, “excludes the obligation to issue a prospectus in offers aimed exclusively at qualified investors, who are supposed to have the capacity and means of information that allow them to make their decision in an informed manner”, but on the other hand ” indicates that investors should be protected by ensuring the publication of reliable information, without distinguishing between the different types of investors “.

The Supreme Court went to the CJEU to find out and clarify whether community legislation contemplates any way of trying to assess whether investment professionals are in a position to better understand the economic situation of the issuer of the public subscription offering on the margin of the prospectus, “based on their legal or commercial relations with said issuer (for example, if it is part of its shareholders, of its administrative bodies “.

In today’s judgment, the Luxembourg Court says that the Directive must be interpreted as meaning that in a public offering for a mixed share subscription “the action of responsibility for the information contained in the prospectus does not only protect retail investors, but also qualified investors”. Therefore, the Court of Justice believes that all those who have participated in an offer, regardless of who they are, “have the right to exercise a liability action for that information, whether or not they have been recipients of said prospectus”.

That said, the CJEU also points to the fact that professionals have access to more information than the brochure, and that can be taken into account by the judges when evaluating each case. The European Directive does not oppose provisions of national law (such as those in Spain) that, when ruling on the liability of a qualified investor for the information contained in the prospectus, “allow the judge to take into consideration that said investor had or should have knowledge of the economic situation of the issuer of the public share subscription offer based on its relations with it and outside the prospectus, or even oblige the judge to take that fact into consideration, provided that the aforementioned provisions are not less favorable than those that govern similar actions provided for in national law or have the practical effect of making the exercise of liability action impossible or excessively difficult “.

The key element is clear, but Luxembourg recalls that Member States have a wide margin “of appreciation when setting the terms of the exercise of liability action for the information contained in the prospectus. “The prospectus is class for retailers, but” Qualified investors, given their level of experience, usually have access to other data that can inform their decision-making. Therefore, in principle, Member States may allow or even require that, when taking the action requiring responsibility for the information provided in the prospectus, the level of experience of the qualified investor and their relationships be taken into account. with the issuer of securities in question “.

30 million at stake

The ruling will in principle have little impact for the group since most of the procedures have prescribed or are about to do so as 10 years have already passed since the financial group went public. According to sources close to the process, CaixaBank – which has just closed the absorption of the bank – currently has a risk of approximately 30 million euros due to a score of legal proceedings opened by institutional investors who bought shares.

At a general level, justice has supported in recent years the argument made by these investors about the misinformation contained in the IPO prospectus, which gave a distorted image of the entity’s real financial situation. The struggle between institutional investors and the group that presides Jos Ignacio Goirigolzarri It has resulted in 84 judgments in the first instance, of which 24 are favorable to their interests and 60 are unfavorable, and another 45 judgments in the second instance in different Provincial Courts, 31 of them being unfavorable and 14 favorable. There are currently a total of 21 appeals filed, 9 have been filed by investors and 12 by Bankia.

The group’s IPO trapped many institutional investors who, together, subscribed for shares for a total of 1,237 million euros. This represented 40% of the operation, while the remaining 1,855 million corresponded to the retail segment made up of individuals. The names of the investors included relevant Ibex brands such as Mapfre, Santander, Iberdrola, Gestamp, Popular, Sabadell, Telefnica or ACS.

The main affected was Mapfre, who made an investment of 280 million in PAHO. The insurer, however, always rejected the possibility of claiming damages for an alleged fraud in the operation, since until last year it had been Bankia’s main insurance ally. That relationship was broken with the absorption of the bank by CaixaBank, but the possible statute of limitations limits the company’s current options for claiming.

One of the great institutional battles for the IPO was that of Iberdrola, which did decide to sue the bank after a failed investment of 80 million euros. In that case, the court took a position on the side of the financial institution arguing that Iberdrola could have known the state of the entity through other means than the brochure sent to the National Securities Market Commission (CNMV).


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