Bank Leumi (TASE: LUMI) shares may come under pressure, as options on 40 million shares given to employees in 2006 as part of the bank's privatization vest today, and the market has no idea whether the employees will sell the shares or not. The options' strike price is NIS 11.50 per share, about 30% below the share's opening price of NIS 14.95.
Bank Leumi's share price has fallen 15% from its most recent peak. Market sources believe that some bank employees will prefer to sell their shares, because they fear a further drop in the share price.
However, other employees may prefer to hold onto their shares, as Bank Leumi may be allowed to distribute a dividend this year because it is meeting the new Tier-1 capital adequacy ratio mandated by the Bank of Israel.
A top market trader said, "Bank Leumi is traded at a price-to-book ratio of less than 1, which is another reason for employees to hold onto their shares."
The 40 million shares are currently worth about NIS 600 million, about seven times the average daily turnover of Bank Leumi's shares. The shares are therefore a major overhang.
Bank Leumi's share price rose 0.8% in morning trading today, giving a market cap of NIS 22.03 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on June 13, 2010
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