Northern Rock

[empip]

IF the book value of Northern Rock shares WAS £4 each at the point of nationalisation... Should our Govn (you & I) - the nationlisers - pay compensation to shareholders??
NR Shareholder

 

[blondini]

Food for thought.

14/09/07 Northern Rock shares plunge 32%

Some customers were queuing outside Northern Rock branches
Shares in one of the UK's largest mortgage lenders, Northern Rock, have fallen 32% after it had to ask the Bank of England for emergency funding.

16/09/07 If no buyers come forward, it seems likely Northern Rock’s business will be gradually wound down, effectively leaving it with a shrinking mortgage book as loans are repaid. Its advisers are thought to have calculated that, in this situation, it would be worth about 180p a share.

The shares fell 35 per cent to 282.75p on Monday. Other bank shares also fell sharply, with Alliance & Leicester down 31 per cent, Bradford & Bingley down nearly 15 per cent and HBOS 5.5 per cent lower.


19/09/07 Northern Rock shares fall again. Shares in Northern Rock have slumped again on speculation that the stricken lender will be sold off at a discount.

21/09/07 The disastrous fall in Northern Rock's value means its shares have crashed by more than 70%, slashing the group's value by almost £2bn in just one week. Down from the £2.7bn it stood at before the Bank of England was forced to reveal it was making an emergency facility available to the group.

With analysts at Citigroup putting a rock bottom valuation on the shares of just 6p - or just £25m for the company - if a bid fails to materialise, Northern Rock's share price is now said to be almost entirely in the hands of short-term speculators.

 

[empip]

...SRM's case echoes the one launched by the UK Shareholders Association (UKSA). Both argue that the "constraints imposed by the Government" in calculating the level of compensation rigged the result in the state's favour. SRM said: "The Government's compensation scheme can be expected to produce a nil value whereas Northern Rock's book value was at least £4 a share."...

I bet they win if they proceed - Our Govn notso clever when the chips are down... A couple of adverse newspaper articles and Brown the clown will be running for cover hurling our dosh about him.

 

[JohnD]

Why is Book Value relevant?

What is the book value of my car? If it breaks down, I can't repair it, and I sell it for scrap tomorrow, how much should the government pay me? How about if the goverment lends the scrap dealer enough to put it back on the road - how much compensation should the government pay me in that case?

If speculators bought 25% of the company just before it went bust, at, say, 95 pence a share, how much compensation should the taxpayer give them?

 

[Bilioustrumpstaine]

If I put £10 on a horse and it didn't win would the government compensate me for my loss.

 

[Softus]

Should our Govn ... pay compensation to shareholders?

Yes - I'd happily support the gift of £1 to each shareholder who admitted to being (a) greedy enough to invest in the first place, (b) stupid enough to hang on in there when the wheels came off.

 

[AtoZ]

sorry empip but no they shouldnt.

in real terms you are actually asking 'me' to fund 'you' playing the market!

the govt have no money, they use mine and every person on this forum.

you might have bought me a beer if we met but you wouldnt give me money to spend on anything i wanted to buy.


no point in blaming brown... blame greedy bankers around the world and then blame all of us for asking our children to subsidise our new found wealth. (house price increases)

i am sorry for any actual loss you incurred but you never asked if i was sorry, you asked if i should pay.

 

[Agile]

I think some of you are missing the point!

Northern Rock was a major mortgage lender and there are millions like me with mortgages who also have shares from the privatisation.

Mine were worth £1300 at the peak and now apparently nothing.

Most NR shareholders are those with mortgages and a few with small deposit accounts.

We are not big financial players!

Tony

 

[Deluks]

How much did you pay for those shares?

 

[JohnD]

It is an unfortunate fact that shares can go down as well as up and down.

It is always best advice not to keep all your eggs in one basket.

If you had bought shares in BT in 1994 at £3.60, you would have been feeling pretty pleased when they briefly topped £15 in 1999.

However you would be feeling pretty sick when they subsequently fell to their current price of £2.40 ish. But if you had been lucky or clever enough to buy then for £1.50 in 2003 you might today be feeling very satisfied.

You might be disheartened if you had held shares in Railtrack, or Royal Sun Alliance, Alliance and Leicester or any of a host of big names that have their ups and downs. If you held shares in Marks & Spencer you could have seen them move between £2 and £7 and back to £4

In the same way that shareholders did not give their profits to the government when prices went up, they cannot give their losses to the government when prices go down.

Investing in shares can bring good returns, but it can also bring some very bad ones.

As Ned Kelly said, "Such is life"

 

[AtoZ]

agile
the day you decided to keep the shares you became a player.
if you ever took a dividend or took extra shares then you became a player.

my point is general and not directly aimed at northern rock shares or share holders
i dont mean to be brutal but that is the name of the game.


for what its worth, i used to own a part of rover, telecom and british gas before maggie sold them off...

i didnt get a cent..

people forget how bent maggies govt was.

 

[Softus]

Mine were worth £1300 at the peak and now apparently nothing.

If you didn't buy them then you've lost nothing.

If you bought them then you're an investor.

If you're investor who didn't realise that you could lose your money, then you're a foolish investor.

 

[JohnD]

possibly a sadder and wiser one now

 

[empip]

Maybe the shareholders have a case...

http://www.uksa.org.uk/NorthernRock.htm

... In our view the UK Government have confiscated the shares even though there was a good private sector solution on the table that would have enabled the company to recover and to repay the debts it owed to the Bank of England.

They have promised to pay some compensation but have rigged the basis of the valuation of the shares so that shareholders are likely to get very little or nothing (newspapers have been suggesting it could be as little as 5 pence per share and we also believe it will be a negligible figure).

Why have they done this and how? The reason they have done this is apparently because they have deduced that it offers 'better value' to the Government to acquire the shares for a pittance, and then sell off the company after a period of 'temporary public ownership' to the highest bidder. Note that there is no commitment to give back to former shareholders any interest in the company when it is subsequently sold, so you will not benefit from any recovery in the business.

Rigging the Independent Valuation. How has the Government rigged the compensation terms? They have set the terms of reference for the independent valuation by specifying that the following assumptions (amongst others) should apply:

a) that the company is unable to continue as a going concern; and

b) that the company is in administration.

These 'assumptions' clearly did not apply when the nationalisation took place. The company was not in administration, and was trading normally and as a going concern (as Ministers have repeatedly said in Parliament and elsewhere). Such terms of reference for the valuation of any company are likely to result in a negligible valuation. In addition the selection of the valuers is solely at the discretion of the Treasury and there is no guarantee that they will be unbiased and impartial...

I too thought NR, although in trouble, was not in administration and still trading at the time of nationalisation... This may prove to have been a panic move by HMG leading to them tilting the playing field - for which we may yet have to pay.

 

[JohnD]

Maybe the shareholders have a case...

and maybe the people trying to winkle money out of the taxpayer are predominantly speculators who bought the shares cheap as the company was approaching collapse, gambling on making a fat profit.