Shares in Monte dei Paschi di Siena (MPS), Italy’s third-largest bank by assets, dropped by 20% to €1,756 ($2,3766) amid the bank’s capital raise attempt of €5bn ($6,8bn) to repay its state bailout.

The Tuscan bank, which has already taken two bailouts since 2010, caused ‘confusion’ on the Milan stock exchange in the first two days after its bumper fundraising, with shares jumping 40%. The shares were halted from trading, and rights to buy into the cash call were also suspended from trade after falling 11%.

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The large size of the rights issue has effectively stalled trading in the shares for technical reasons, which have created a big gap between the bid and offer prices.

The cash call is nearly twice the bank’s market value of €2.9 bn ($3.95bn). It offers existing shareholders 214 new shares for every five held, at a price of €1 each.

The price of €1 for the new shares represents a 35.5% discount to the theoretical ex-rights share price taking into account the dilutive impact of the cash call, and a 96% discount to the previous closing price of around €25.

Traders and other financial market sources said the fact that the new shares are not available for several weeks has helped to increase their price. However, they expect a continued stock market volatility for several weeks.

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MPS, which has been heavily hit by the financial crisis, has cut 20% of its cost base in the past two years but has struggled to increase profitability. As of March 2013, it reported its eighth consecutive quarter of losses. The bank also has around €25bn worth of non-performing loans.

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