Forum debate: All-in on Santander at €2

Santander at €2: The bet dividing investors

There is a scene that repeats every time a Spanish bank approaches a round number on the stock exchange: someone decides that this is the floor, that from there it can only go up, and that the opportunity deserves risking one's entire fortune. The thesis opening this discussion is exactly that: if Santander touches €2 again, go all in. The idea, formulated without nuance, is that during the year's steepest drops—March 12, when the share barely fell below €2.1 and €1.9—Spain's major banks did not collapse completely because there are hands that do not want them to fall. The author of the proposal summarizes it thus: "the flagships will suffer, but they won't be allowed to crash", explicitly citing BBVA and Santander.

The response was immediate. And it was not kind.

Is Santander an investment or a falling knife?

The first counterargument to appear is the most obvious and devastating: Santander has been in continuous decline for three years before the pandemic. A stock with such history is not an opportunity, it is a trap. The metaphor repeated is that of the knife: "never catch a falling knife", and even less so set sail in a storm. The reference to Banco Popular is constant: its last shareholders thought exactly the same, that the bank was too big to fail, and ended up with zero-value shares.

Some go further and point out the sector's structural problem: banking operates with zero interest rates, leaving little margin. And Santander also has a history of shareholder dilution that does not invite optimism. In 2020, the bank canceled all its dividends, while BBVA did not. For a long-term investor seeking income, that difference weighs heavily.

Irony runs through many responses. It is suggested taking a loan from Santander itself to invest in Santander, because then, if the bank goes bankrupt, there is no one left to repay. A textbook win-win. Others directly propose putting half in Liberbank and the other half in Banco Popular, two entities that by the date of this discussion no longer existed as such.

The General Motors precedent and other unexpected bankruptcies

The most instructive comparison appearing in the discussion is that of General Motors. In 2009, GM had fallen from $70 to around $9. It seemed too big to fail. Overnight, trading was halted and the company declared bankruptcy. Shortly after, new shares were issued sold at a good price, leaving former owners with nothing. The parallel with Banco Popular is evident: nobody thought it would fail; it was considered Spain's healthiest bank, with no mortgage credit exposure. And it failed.

The conclusion drawn by several participants is that the stock market is unpredictable. What looks like a floor today is a cliff tomorrow. They add a psychological nuance: when you gain 20%, nobody speaks up; when you lose, shareholder committees, class-action lawsuits, and victim platforms are formed. The asymmetry between gains and losses is total.

The alternative: diversify instead of betting everything on one card

Faced with all-or-nothing, the proposal to build a diversified portfolio arises. Several piles: one in Telefónica, another in Santander, another in BBVA, Mapfre, Repsol, AT&T. Up to thirty or forty different positions. The idea is that if one goes to zero, the others compensate. The option of an ETF is also mentioned, allowing one to sleep soundly waiting for a reliable floor: the 6,000 points of the Ibex or the 15,000-18,000 of the Dow Jones are the levels discussed as entry references.

For those operating short-term, the advice is different: choose companies that trend upward in the long term, so if you get stuck, you have chances to recover your investment. And if operating in banks, do so with the awareness that they have no floor. Santander's minimum at that time was €1.77, and some waited for it to break to seek a rebound between €1.60 and €1.70. The casino strategy, but knowing the asset is a ruin.

Analysts also enter the equation

Amid general pessimism, notes from major investment banks appear. Goldman Sachs recommends buying Boeing with a target price of $238, causing a 12% rally in the Dow Jones. Morgan Stanley shows optimism towards Santander, with 69% potential, and BBVA, with 20%. The forum's reaction is absolute skepticism: "I wouldn't trust them one bit." It is recalled that these analysts are market makers, who might be heating up the stock to provoke a rebound they are already inside. Distrust towards the official narrative of large banks is total.

The discussion drifts towards the memory of branch managers who recommended buying BBVA at €9. The stock today trades at a fraction of that price. The anecdote serves to illustrate why many investors distrust banking advice.

The close: the data that disorients

The discussion reaches no conclusion. Some wait for Santander to drop below €1 to enter. Others plan to buy at €1.86 and sell at €1.96. Someone jokes that if the bank reaches €0.0000001 after infinite reverse splits, there will still be those who say it cannot go lower and that it is the opportunity of a lifetime. And amidst all this, a data point nobody disputes: Santander trades at €1.83, BBVA at €2.53, and the Ibex continues to leak everywhere. The question is not whether the bank is a good investment. The question is whether anyone really knows where the floor is.