CaixaBank will have to compensate Porcelanosa for Bankia’s IPO | Economy

Rodrigo Rato, former president of Bankia, at the entity's IPO.
Rodrigo Rato, former president of Bankia, at the entity’s IPO.Paul Monge

The legal battle over Bankia’s turbulent IPO in 2011 continues. And not in all cases the disagreement ends in the same way. In fact, in the resources of institutional investors, the Supreme Court is resolving the bulk of the demands and gives them one of lime and another of sand. For example, in a ruling of March 24, the magistrates have ruled that CaixaBank, which absorbed Bankia, must compensate Porcelanosa with half a million euros because it did not have additional information to that of the brochure. However, they have ruled that the Catalan entity should not return the money to Festina Lotus – the judges of lower instances ruled that the investment decision was made for strategic reasons regardless of the content of the brochure – and have dismissed Llanera’s appeal – his claim arrived out of time.

Thus, the judges have avoided agreeing with the entity or the investors in all cases, as if it were a Solomonic decision. In other words, it depends on the specific circumstances of each investor, as stated by the Court of Justice of the European Union. There is a shared starting point in all cases: Bankia breached its essential contractual obligations, “especially the obligation to publish truthful and sufficient information regarding PAHO [oferta pública de suscripción]”, according to the different Supreme Court rulings analysed. Despite this, this does not mean that CaixaBank is ordered to pay compensation in all cases. According to legal sources, there are twenty lawsuits pending, although the bank has provisioned them and has a very low risk.

This does happen with Porcelanosa, which invested 3 million euros, which feeds the expectations of the rest of the applicants. After the sale of his participation, as well as the expenses incurred, he lost 517,501.86 euros plus legal interest from the date the lawsuit was filed. Bankia filed an appeal in which it alleged that “institutional investors have access to information that is complementary to and different from the prospectus.” Even so, the Provincial Court of Castellón declared that it was not an “expert company in investments in the financial field, nor is there evidence that it could have accessed sources of information other than those in the prospectus.” For this reason, the ruling dictates, “arguments relating to Porcelanosa, as a qualified investor, could adequately interpret the information contained in the prospectus are also inadmissible”. To which he adds that the issue was “that the brochure contained false information.”

Festina Lotus: strategic decision

The Supreme Court does not resolve all cases in the same way. That is, because the prospectus has been shown to be incorrect, not all investors are right. In each appeal, he analyzes the reasons and the specific circumstances to resolve the matter. This is what it does, for example, in the case of Festina Lotus, which invested almost two million euros in Bankia (1,999,998.75 euros).

In this appeal, the magistrates argue that the banking entity should not pay compensation for the reason for Festina Lotus’ decision, as was proven in the ruling of the Madrid Provincial Court: “According to the statements made in court by its president, its The investment was not related to the solvency of the issuer, but to a long-term linkage strategy with lenders”, to which he adds: “The same representative acknowledged that the information in the prospectus was not taken into account and in fact they maintain the investment”.

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For this reason, the Supreme Court maintains this position, understanding that Festina Lotus’ investment was not based on the false information in the prospectus, but rather on its intention to link up with an entity to which it would turn as a lender, “in order to ensure the lines of credit necessary in the development of its business activity and compensate the interest”. In addition, as the president of Festina acknowledged, there was no intention of selling the titles.

Llanera: resource out of time

Another of the appeals dismissed is that of Llanera SL (which absorbed Llanera Urbanismos e Inmobiliaria, the company that invested 100,000 euros in Bankia in 2011). In this case, the magistrates of the Supreme coincide with the decision of the court of first instance and the Provincial Court of Valencia “by considering the action for annulment due to vice error to have expired and the action for liability due to inaccuracy of the brochure to have expired.”

The first dispute deals with the start of the business period for filing an appeal. On this, the courts set “clearly May 25, 2012” as the date on which the countdown starts. It was then that Bankia’s house of cards collapsed and it was recognized that the information provided until then was false: the accounts were reformulated, its listing on the Stock Exchange was suspended and the entity requested a capital injection of 19,000 million euros. However, Llanera only sued on July 29, 2016, when “the legal term of three years for the exercise of the liability action had already elapsed.” Hence, the Supreme Court has also exempted CaixaBank from paying compensation in this case. Good news for the Catalan entity, although it knows that it will not suffer the same fate in all resources.

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