How does £5b turn into £1.4b?

An interesting point from the FT's Jim Pickard who asks a puzzling question ahead of the bank bailout

Taxpayers put £5bn into RBS in the form of preference shares in October. The bank now has a market capitalisation of £13.7bn (as of Friday night).
The government is tomorrow expected to swap the preference shares for equity. We - the public - will end up with another 10 per cent of the bank, ie up from 58 per cent to 68 per cent.
So we seem to be exchanging £5bn of pref shares for £1.4bn of equity. How come?

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