Around 250 directors and senior staff of Halifax Bank of Scotland snapped up more than £6m (€7.7m) worth of the bank’s shares the day after last week’s dramatic price collapse.
Chief executive Andy Hornby led the way in what the bank said was a “demonstration of confidence” in the stock, splashing out more than £400,000 (€515,000) on 92,812 shares with his annual cash bonus last Thursday.
He was joined by finance director Mike Ellis, who bought 10,257 shares, and other executive directors and the top 250 senior managers. Together they purchased a block of 1.4 million shares at 446.25p.
The previous day had seen the share price of Britain’s biggest mortgage lender slump 17% at one point amid rumours it was facing Northern Rock-style liquidity issues.
The unfounded allegations prompted furious denials by the bank, an unprecedented statement from the Bank of England backing up the lender, and an investigation by the City watchdog into that day’s suspicious share movements.
HBOS share prices ended Wednesday 7% down on their starting price before the crash, and had clawed back most of the loss by the time of the staff mass purchase, the bank’s spokesman said last night.
He said: “This is a very straight forward demonstration of the very high confidence our senior management has in HBOS. This is a very strong company with good prospects.”
The spokesman added: “This sort of thing is exactly what the City wants to see, and this is the best answer to those people who spread false and malicious rumours.”
Shares in HBOS ended the week at 473.75p, netting Mr Hornby a paper profit of more than £25,000 from his morning share swoop.
He and the other staff involved had been paid their annual cash bonuses on the Thursday.
Along with the UK’s other major banks, HBOS shares have fallen in value over the past year as the credit crunch has taken its toll on the financial markets. The stock is currently worth around a third of its price a year ago.
HBOS said it was also preparing to hand over its own detailed dossier about Wednesday’s dramatic share price movements to the UK Financial Services Authority.
A team of internal staff have been working on finding out what happened, and outside expert help may be brought in to finalise the document.
The bank’s spokesman said: “We are compiling as quickly as possible a complete dossier which we will pass to the FSA. We are looking at whether we want to take on some external help.”
Richard Wyatt, a former executive at broker Panmure Gordon, has reportedly been lined up to help piece together what sparked the sell off.
It is thought HBOS stock was hit by a wave of “short selling” on Wednesday, where investors borrow stock in a company and sell it in the hope of buying it back at a lower price later to return to the original owner – pocketing the difference as profit.
One trader reportedly made as much as £100m (€129m) from the volatile share price movement.