Only 8.3 percent of HBOS investors took up the offer of £4 billion new shares. Barclays did a little better, managing to offload around 19 percent of their £4.5 billion
The HBOS underwriters must be sweating. On Friday, the market capitalization of HBOS was about £10 billion. With the new £4 billion of shares, the underwriters now own something like 27 percent of the bank. If the price continues to collapse, the underwriters will be looking at huge losses.
Today's rights issue failure illustrates the collapse of confidence in UK banking. The banks have only themselves to blame. They pumped up the housing bubble, and like a ravenous dog, those overinflated house prices are coming back to maul them.
There is a deeper problem. Today's pathetic attempts to raise additional bank capital have almost certainly closed off rights issues as a mechanism to shore up bank balance sheets. As the housing crash accelerates and arrears begin to rise, banks will begin to accumulate losses. At the moment, UK banks have insufficient capital to absorb these losses. Deferring dividends might help a little, but in the end, some weaker banks could drift towards insolvency.
The banks look like they have exhausted market solutions for resolving their lack of capital. Sovereign wealth funds won't touch them; rights issues are infeasible; this leaves only one other source of capital; the taxpayer.