The steep drop in First Republic Bank (NYSE: FRC) shares Monday came as a surprise to markets, especially in light of the US government’s unprecedented life support injection into the financial system.
It turns out the culprit behind the stock sell-off was Alecta, Sweden’s largest pension fund, which liquidated its entire FRC stake at a staggering loss of 7.5 billion kronor ($728 million). “The uncertainty about the bank’s future was too great, partly due to the fact that the lender was downgraded to junk status,” explained Alecta CEO Magnus Billing in an emailed statement to Bloomberg.
Since 2019, Alecta invested a total of 9.7 billion kronor into FRC “before a sale on March 15.” The colossal injection made the pension fund the fifth largest shareholder in FRC. However, Alecta’s now-failed investment strategy doesn’t stop there: the pension fund, which manages money for over 2.6 million Swedes, also heavily invested in now-collapsed Silicon Valley Bank and Signature Bank, and will write-off those investments at a cost of $1.1 billion.
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“Obviously it’s a big failure for us as an investor,” said Billing in an interview with Bloomberg last week. “We need to learn something from that and take actions based on the lessons learned.”
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
