In recent news, Credit Suisse has experienced a significant stock crash, losing over 74% in the last 8 trading sessions. This crash is worse than that of the Indian conglomerate, Adani Group, which also suffered a stock drop of around 52% of their combined market value in the last two months, losing around Rs 10 lakh crore of its market value.
The trouble at Credit Suisse started when the bank refused to accept Adani bonds following the Hindenburg report, which raised concerns about the Indian conglomerate’s business practices. Credit Suisse’s troubles were further compounded when its 2022 annual report identified “material weaknesses” in internal controls over financial reporting.
As depositors started withdrawing funds from the bank, the stock crash deepened, prompting a government-brokered rescue deal with UBS Group. The deal valued Credit Suisse at just $3.25 billion, leading to a stock crash of over 63% to hit a low of SFr 0.68 on the exchange.
Under the terms of the merger agreement, all shareholders of Credit Suisse will receive 1 share in UBS for 22.48 shares in Credit Suisse. Credit Suisse’s stock is now trading at an all-time low level, dropping more than 99% from its peak in 2007.
Swiss regulator FINMA has been monitoring Credit Suisse intensively for several months and stated that there was a risk of the bank becoming illiquid, even if it remained solvent. Therefore, it was necessary for the authorities to take action to prevent serious damage to the Swiss and international financial markets.
Overall, the stock crash of Credit Suisse has had significant consequences for the bank and its shareholders, leading to a government-brokered rescue deal and a substantial drop in the bank’s stock value.