Intesa Sanpaolo, Italy’s largest bank by assets and market share, has sold its entire 5.1% stake in Nexi for €584 million.
Nexi, one of Europe’s biggest payments groups, recently reported higher than expected third-quarter core earnings as it confirmed guidance for the full year.
Shares extended gains after the results and were up 8% against a 2.6% rise in Italy’s blue-chip index.
The sale of shares by Intesa appears to be an effort to cash in on this recent rally in shares.
Intesa agreed to a 25-year partnership as part of the Italian bank’s 2020 sale of its retailers’ payments business to Nexi.
Intesa said in a statement that the sale of the stake would have no impact on its strategic partnership with Nexi.
Under the 2020 deal, which yielded Italy’s biggest bank a capital gain of €1.1 billion, Intesa took a 9.9% stake in Nexi.
Intesa’s stake got smaller as a proportion of Nexi’s capital after merger deals with Nordic rival Nets and domestic peer SIA, which saw Nexi issue new shares to the two companies’ existing shareholders.
However, shares in Nexi are still down 30% on a year-to-date basis, according to Refinitiv data, having suffered a sell-off along with other FinTechs as economic growth slowed and interest rates rose.
Intesa paid €653 million for its 9.9% stake, which comprised around 67 million shares.
One reason for the sale might be that Nexi appears to be carrying a lot of debt. In June 2022 Nexi had debt of €8.81 billion, up from €6.74 billiob in one year. However, it also had €1.83 billion in cash, and so its net debt is €6.99 billion.
Zooming in on the latest balance sheet data, we can see that Nexi had liabilities of €1.53 billion due within 12 months and liabilities of €10.0 billion due beyond that.
Offsetting these obligations, it had cash of €1.83 billion as well as receivables valued at €2.76 billion due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €6.97 billion.
This deficit is considerable relative to its very significant market capitalization of €11.4 billion, so it does suggest shareholders should keep an eye on Nexi’s use of debt.
Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution.