Credit Suisse shareholders do not want to accept the low purchase price that UBS had to pay.
(Photo: Bloomberg)
Zurich Several investor protection groups in Switzerland want to challenge the terms of the state-mandated bailout for Credit Suisse. They are preparing lawsuits against the takeover price of three billion francs, which investor lawyers believe is too low, which UBS paid for Credit Suisse in the course of the emergency takeover in mid-March.
Philippe Grivat, lawyer and co-founder of the legal tech company Legalpass, says: “We believe that the takeover price is too low.” Therefore, the company specializing in mass proceedings wants to challenge the exchange ratio at which Credit Suisse shares were converted into UBS shares.
Investors received a UBS share certificate for every 22.48 Credit Suisse shares in their portfolio. This ratio corresponds to a price per Credit Suisse share of almost 80 centimes – and thus a discount of more than 60 percent on the last market price in mid-March. Grivat explains: “We are concerned with financial compensation, not additional shares.” UBS wants to sue for such compensation.
Anyone who was a Credit Suisse shareholder on March 19 can join the lawsuit – regardless of where they live. According to Legalpass, it also represents investors from Germany. Legalpass bundles the lawsuits to have greater clout. “It would be almost impossible for a single shareholder to make themselves heard,” says Grivat.
Legalpass works with the law firm Baumgartner Mächler. The influential shareholder representatives of the Ethos Foundation, which represents the interests of Swiss professional investors, also support Legalpass’s lawsuit. The Swiss Investor Protection Association (SASV) is also collecting complaints from affected shareholders. A high number of inquiries were received and the decision was therefore made to coordinate a lawsuit, says Arik Röschke from the SASV.
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“The aim is to secure a cash settlement payment for Credit Suisse shareholders that corresponds to the value between the value determined by the merger agreement and the value determined by the court,” says Röschke.
Lawsuit is the only chance for a settlement
Grivat says: “It is one thing to claim that there were no alternatives, another to prove it.” It is now up to UBS to prove that without their intervention Credit Suisse would have collapsed and that there were no scenarios in which shareholder rights would have been preserved.
In mid-March, the Swiss government relied on emergency law to secure the takeover of the struggling Credit Suisse by the largest Swiss bank. As a result, the deal did not have to be approved by the shareholders of the two banks at extraordinary general meetings. In addition, the submission of a detailed merger report was omitted.
Alexander Herzog, lawyer and expert in capital market law at the Broich law firm in Frankfurt, explains with regard to the review action: “In such proceedings, the appropriateness of the exchange ratio is subsequently determined by a court.” If this is too low, shareholders could hope for an additional payment. “In my opinion, these proceedings have a higher probability of success than the lawsuits against Finma or the Swiss state.”
The Swiss financial regulator Finma had ordered the write-down of certain subordinated bonds of Credit Suisse as part of the bank rescue. Investors lost 16 billion francs and therefore sued the Swiss state before the Federal Administrative Court in St. Gallen.
Investors received a UBS share certificate for every 22.48 Credit Suisse shares in their portfolio. This ratio corresponds to a price per Credit Suisse share of almost 80 centimes – and thus a discount of more than 60 percent on the last market price in mid-March.
(Photo: Reuters)
The Swiss government justified the curtailment of shareholders’ rights by saying that a solution had to be found by Sunday evening, March 19th, in order to prevent a global banking crisis. Now Grivat says: “However, emergency law does not prevent the merger price from being subsequently reviewed by a court.”
Swiss law does not provide for class action lawsuits. According to Grivat, a decision in an individual shareholder’s lawsuit under the merger law applies directly to all other shareholders. So, in theory, investors can hope for a plaintiff’s success and collect the settlement at no cost to themselves.
However, providers such as Legalpass or the SASV advertise that they can make comparisons for everyone who has joined the lawsuit. “Should UBS offer a settlement in our proceedings, all participating shareholders will vote together on whether this should be accepted,” explains Röschke.
The cost of taking part in a lawsuit by service providers such as Legalpass is 15 centimes per share certificate, less for major shareholders, but at least 120 francs. The costs at the SASV have not yet been determined. Investors have until early August to decide whether to join a lawsuit.
More: Contradictions in Finma’s disposition give complaining investors hope