The Swiss government is selling its 332.2 mln shares at a price of CHF 16.50 per share, i.e. 5,4813 CHF. In addition UBS agreed to pay the Swiss government CHF 1.8 bln to redeem revnue lost by the Swiss government due to the conversion of the convetible bond to shares.
The revenue for the Swiss government amounts thus to CHF 7.2813 bln for an investment of CHF 6 bln. This is a return on ivestement of some 25% over 8 month.
The effective date of the deal will be August 25, 2009.
This is good news for Switzerland. Not only did it get rid of any involvement with UBS, it did so at no cost to the taxpayer – if you disregard other stuff such as reputational damage, etc.
Now if the share prices of UBS tanks and UBS needs another capital infusion, the reply should be ‘NO, seek funds elsewhere’.
The timing here is espcecially important. Especially when reading the UBS press release concerning the law suit with the IRS one cannot help but think that there will be issues that could well lead to a drop in share prices.
The US government will withdraw the John Doe summons with prejudice as to all accounts not covered by the treaty request no later than 31 December 2009, provided that UBS has complied with those obligations that are required to be performed by that date.
When contrasted to the IRS interpretation:
Also, the agreement retains the U.S. Government’s right, if the results are significantly lower than expected and other measures fail, to seek appropriate judicial remedies, including resuming actions to enforce the John Doe summons.
So there might be some differences in interpretation here. One might conclude that the story is far from being finished.
The Swiss government’s sale of share may also prove to be a good move when the economy and with it the share prices that are currently artificially inflated tank.
In fact, this looks to me like a nice pump-and-dump by the Swiss government.