A small bought deal for Points International is becoming a large problem for three investment banks.

Loyalty program company Points International sold $48.6-million of stock to a syndicate of underwriters led by RBC Dominion Securities on May 21. The deal has proven an extremely slow seller; most of the stock is still owned by the dealers.

Investors are steering clear in part because most of the cash raised went to Points International backer IAC/InteractiveCorp, as the Barry Diller-controlled holding company headed for the exit. Bought deals tend to be more popular if the money raised is used to fund growth.

On Friday, Points International stock was 12 per cent below the price of the underwriting, at $1.44 a share, compared to the $1.65 a share paid to IAC/InteractiveCorp two weeks ago. This financing closes on June 11, and right now, it is $5-million underwater.

If Points International continues to trade well under the price of the bought deal, the dealers take a hit. For RBC Dominion, an arm of Royal Bank of Canada, the loss would be nothing more than an annoyance.

But for the three other underwriters in this syndicate – Jennings Capital, MGI Securities and Versant Partners – sharing in a $5-million loss would mean real pain