The share price of troubled Spanish property company Colonial dropped more than 20% on Thursday after stock market regulator CNMV lifted a trading suspension. The sharp decline follows a 40% drop in value last week which prompted the resignation of chairman Luis Portillo.

The share price of troubled Spanish property company Colonial dropped more than 20% on Thursday after stock market regulator CNMV lifted a trading suspension. The sharp decline follows a 40% drop in value last week which prompted the resignation of chairman Luis Portillo.

Colonial's shares fell as much as 23% to a year-low of EUR 1.44 on Thursday and closed down 13.30% at EUR 1. 63. This compares to a peak of EUR 6.08 in January last year.

In a recent statement, Colonial argued that 'no significant fact justified the recent negative evolution of its quotation' and blamed the unwinding of derivative positions for the recent stock price slump.

Portillo said in a statement to the CNMV that the derivative positions he holds in the company are not the reason behind the collapse in the property group's price on 27 and 28 December. In a separate statement to the CNMV, another major shareholder and board member Luis Nozaleda said the company has put a number of Colonial shares on the market, but added that at present the amount could not be clarified. Both Portillo and Nozaleda were replying to the CNMV which is trying to determine if Colonial's core shareholders had a role in the collapse of the share price.

The major shareholders in Colonial are Portillo (40%), Nozaleda, Spanish firm Nozar and billionaire Alicia Koplowitz. The free float accounts for around 21% of the shares.

Colonial is one of several Spanish real estate firms that experienced phenomenal growth in the last ten years due to a boom in the Spanish property market. Now the companies are suffering from a combination of tighter credit conditions and falling house prices. Colonial has one of the highest debt to asset ratio of 66.8%, thanks to its aggressive merger and acquisitions drive last year.

House prices in Spain increased with an historic low of 1.1% in the last six months of 2007, down from a rise of 9.1% from January to June 2007.