Northern Rock Shareholders

sh856531

I think the shares should be given a value.

Unless I'm misunderstanding the situation, the shares have been given a value - 0 pence per share.

The fact that the government is having to bailout NR to prevent its imminent collapse strongly suggests to me that the company was worth absolutely nothing.

Have I perhaps missed something?

Thanks

S

opinions4u

sh856531 wrote: »

Have I perhaps missed something?

Only that Northern Rock shareholders weren't entitled to benefit from the bailout afforded to HBOS and RBS.

Other than that, your point is solid.

mrposhman

sh856531 wrote: »

Unless I'm misunderstanding the situation, the shares have been given a value - 0 pence per share.

The fact that the government is having to bailout NR to prevent its imminent collapse strongly suggests to me that the company was worth absolutely nothing.

Have I perhaps missed something?

Thanks

S

Yes you are missing something. There is currently no value attributed to the share, not nil, its just one hasn't been attributed yet. Read here:

A firm of accountants is assessing how much the shares were worth and how much compensation should now be paid.

As for whether its right that they get compensation, I'm not sure. We can't ignore the fact that NR shareholders rejected an offer from Virgin Finance as they thought the government were going to help them with a better offer. Sorry, but that was their chance to take the best offer they were going to receive.

opinions4u

mrposhman wrote: »

We can't ignore the fact that NR shareholders rejected an offer from Virgin Finance as they thought the government were going to help them with a better offer. Sorry, but that was their chance to take the best offer they were going to receive.

When was that put to a vote of the shareholders?

From memory Virgin didn't get the guarantees they wanted from HM Government and walked away.

The shareholders were never offered that option.

JP45

sh856531 wrote: »

Whilst I don't believe the shareholders are due any compensation, the idea that the shareholders are responsible for the banks collapse is utter !!!!.

There are people on this board who will currently be invested in literally hundreds of companies as part of portfolio balancing. The idea that they could possibly understand the particulars of every business and every industry that they have invested in, such that they could tell whether any single company is playing silly !!!!!!s is stupid.

If the *FSA* couldn't even tell that NR was going down, how could the average investor investing in scores of diverse companies and industries know?

Best Regards

S

I agree. I think people have to accept that when they invest in shares there is a chance, albeit small, that they may lose everything. They also have to accept that as a small shareholder they have, in reality, very little power or influence over the way the company is run. It is the large institutional investors - pension funds and the like - that have the potential to influence the way a company is run and yet, as is now becoming all too clear, they invariably fail to do so.

To me this whole banking crisis has only served to reinforce a view that I have long held, namely that far too many companies are in effect run by and for the benefit of the senior management. It's also evident that most if not all of these failed banks were led by arrogant megalomaniacs whose actions went largely unchecked. I presume it is the role of the Chairman and the non-execs to act as a restraining influence in such cases but that clearly hasn't happened.

danny69

I think what the shareholders want is quite easy to see. They wanted the government to let Northern Rock collapse. The reason why this didnt happen is obvious! If shareholders had got their wish on this occasion and the government hadnt intervened, the housing market etc etc would have collapsed. Many shareholders had savings in that bank, and so if it had gone bust then it would have been a double wammy! If you buy shares, you take the risk. If you read the small print on all financial products they state something along the lines of ''past performance is no indication of future performance, investments can go down aswell as up''. On this occasion it went 'down'. You do have something for your 7000 shares, though, you have a share certificate. Frame it, light the fire with it, do what you want, but one day it might be worth a couple of quid to somebody!

JEFFWT

My friends father who deals in shares has told me on numerous occasions (before the current financial crisis) never to buy shares with money that you can't afford to lose.
To me that was obvious anyway - as a non-savvy financial person I just use 'safe' savings accounts and cash ISAs.
Presumably there are a lot ot people who invest in shares don't realise that they could potentially lose everything?

dunstonh

Presumably there are a lot ot people who invest in shares don't realise that they could potentially lose everything?

Unlikely. Although there are people that thought house prices could always go up and newbie landlords that though they were millionaires despite having just as much debt. So, you may be right.

Single company shares are high risk in isolation. The more you have, the less risk you have. However, even if you had tons of companies its still going to be around the medium/high risk to high risk range. Its more likely that people knew there was a risk but didnt quite realise how much.

sh856531

Hi mrposhman

Yes you are missing something. There is currently no value attributed to the share, not nil, its just one hasn't been attributed yet. Read here:

Thanks for your reply - I understand what you're saying. However, can we not quite reasonably infer that given that the government had to intervene at all - the bank was bust - e.g. worth nothing?

Clearly the government could have just kept signing cheques over to NR to keep them going with bridging loans. However, in this particular case the government decided that that wouldn't offer the best value for the tax payer.

In my mind seeing as its government money that's being used to bailout the bank - the government is more than entitled to "rescue" the bank in any way it sees fit. It might get it right or it might get it wrong - but it is the government's prerogative seeing as its the government that's stumping up the cash.

sh856531

Only that Northern Rock shareholders weren't entitled to benefit from the bailout afforded to HBOS and RBS.

Other than that, your point is solid.

Well, when your bank goes bust and the tax payer has to step in, the tax payer (via government) can choose to "rescue" the bank in anyway it sees fit

It seems to me that shareholders in RBS and Lloyds have thus far just been "lucky" (if thats the right word) not to have been totally taken over by the government just like NR. Thats probably more to do with the fact that RBS's balance book is bigger than our entire economy and the government is !!!!!!!! itself, rather than NR actually being any less deserving of recapitalisation...

Best Regards

Simon