Monday 5 October 2015

Qatar sells Vinci stake; what next for the sovereign wealth fund?

This evening it emerged Qatar is selling 1.1pc of French construction company Vinci to raise around EURO 380 million - and the move is causing quite the frisson in London markets.

Why? Well, the Qataris own big stakes in Glencore and Volkswagen, so market participants are speculating the gas rich gulf country will use the cash from the Vinci sale to finance (potential?) equity fundraisings from both these beleaguered companies.

Here is a little note from one excitable equity salesmen on the share sale:
It's not often that Soc Gen is sole books on two placings in one evening, but then again, it's not often that the EuroStoxx rips 3.3% in a straight line in a single trading session! That small point aside, this is arguably the most interesting trade that has come to market tonight. Soc Gen is selling c.6.46m shares of Vinci (a 1.1% stake) on behalf of Qatar Holdings. Yep, the same Qatar Holdings that has made the press lately thanks to its large positions in both Glencore and Volkswagen. The stock is being offered at €57.92 to market (a 1.45% discount to tonight's close), which optically looks a shade tight for 2 days volume in a stock that popped 3.6% today. Irrespective of how this deal is absorbed, I think the most interesting implication is where the proceeds will go? If the block clears at the bottom end of the range, then Qatar Holdings will be sitting on sale proceeds totalling €419m. I'm not going to speculate where that money is going to go, but I am in no doubt that the market will do that for me (as a thought - Glencore is still trading c.8% below the 125p strike on its recent equity raise). Perhaps more importantly, if the money doesn't get rotated back into another part of Qatar's portfolio, then what does it say about its outlook on the rest of its listed holdings?
Late last week, though, I also picked up some surprising mutterings about Qatar Holdings itself. However, I'm still in the process of investigating that story so until it stacks up I will keep it under wraps.

Whatever the reason for the Vinci share sale, I'm sure this evening's massive trade will trigger all sorts of speculation about what the Qataris might sell next...

UPDATE: So, the equity salesman has calmed down a bit. Here are his latest thoughts:
I did a bit of digging and can confirm that Vinci was the best performing stock amongst Qatar's top 10 holdings in the 3rd quarter. $419m is a relatively small amount of money in the grand scheme of the country's vast sovereign resources, so in the absence of new information, I would be inclined to read the sale as a bid to raise funds for reinvestment, rather than as a directional call on equities (recall that the fund has just opened a new office in New York with a commitment to invest $35bn over the next 5 years). If they have done this right, then fast money may well be spooked into covering shorts in its underperforming holdings tomorrow (i.e. Glencore and Volkswagen). Very smart trade if that was the intention. Why buy the dip when you can bluff hedge funds into doing it for you?


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