Brazilian bank Itau Unibanco Holding SA (NYSE:ITUB) had its share price hit hard after Bank of America (NYSE:BAC) announced their selling their entire stake in the financial institution.
Bank of America held a 5.36 percent stake in Itau, and the divesting of shares is valued at approximately $4.5 billion.
At one point Itau Unibanco had plunged by over 6 percent on the day, but has recovered a little, being down by 5.66 percent as of 2:10 p.m. EST.
“That said, given the size of the secondary offer, and considering it is hitting the market almost at the same time as Banco do Brasil’s publicly disclosed equity offering, we would expect the sector reshuffling and overhang risk to weigh somehow on ITUB’s shares and other liquid names in the industry, even though we think this is an interesting opportunity for investors to gain exposure to Itau Unibanco, our top-pick bank name in Brazil.”
Bank of America agrees that it’s not a core asset of the company, and said they decided to make the sale to shore up its capital.
Preferred shares held by Bank of America in Itau Unibanco will be sold in a secondary offering, while common shares will be acquired by the holding company of Itau Unibanco – Itausa SA.
Bank of America holds 188.42 million in preferred shares, 8.4 percent of all preferred shares in the company, and 56.4 million common shares.