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What's likely to have happened with our Northern Rock shares?
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Back from the dead, briefly, in response to Cloud-Dog..
"As an outside taxpayer looking in I don't agree with the argument and I certainly don't agree with the obsession for focusing on a Labour Government. As has been pointed out numerous times, its the Government."
Lab govt because they did the deed, and may well be in power in 3 days (and actually receive a lot of the windfall) . If others are in power we will approach them, of course, on a similar and reasonable basis, or, if necessary look to new legal action on a different basis to that employed previously.
Remember we ask merely for an inquiry into the discrimination we suffered.
It must be obvious that had the deed been committed by a private company -even more so a hedge-fund - rather than HMG we would have a lot more understanding of and support for our plight...
Ask taxpayers, however, to spend some of ('their') taxpayer funds to repay those (other taxpayers) from whom the same monies were stolen, and you have a different nimby-esque argument perhaps.
Den0 -
Have a look at this London Evening Standard piece:-
http://www.standard.co.uk/business/markets/anthony-hilton-northern-rock-selloff-proceeds-should-go-to-its-charity-10120269.html0 -
The Northern Rock bank was not insolvent it was illiquid -- shortage of cash to meet heave demand of depositors withdrawing money. Insolvency is usually due to lack of profitability. Northern Rock had a substantial Balance Sheet with approx. £ 120 Billion in Assets ( but only £ 4 Billion in CASH). The Run caused a cash or liquidity problem -- no bank anywhere in the world can meet the cash needs of a "Run" when all depositors want all their money returned immediately.
Value of a Bank or any enterprise depends on several factors, primarily profitability, growth in earnings, market reputation and brand value, customer satisfaction, Dividends. The share price reflects the "Price/Earnings" ratio -- it is a multiple of projected earnings for the enterprise taking account of past performance and future prospects. The Net Asset Value also affects the "value" of the shares. On all criteria, NR was a highly profitable, high growth banks offering savers and investors very attractive returns in terms of income (the dividend stream) and capital (reflecting growth prospects for the bank and the economy.
People keep quoting that the share price was only 96 pence prior to nationalisation! This is very misleading! Taking account of the financial prospects for the Economy (UK) the share price fluctuated between £ 12 (February 2007) and £ 6.45 (immediately prior to the "Run" on the bank). A Fair Value for Nr was close to £ 8.50 -- brokers had targets over £ 10. The Tripartite disaster in mismanaging the global crisis and the provision of LOLR to NR in particular caused the share price to slide badly with erroneous assumptions and speculation as to the level of toxic debts. In reality these have been very low at less than 2% of total assets -- far lower than the RBS, Barclays, Lloyds experience of systemic risk and MISCONDUCT, market manipulation and obscene bonuses!
So Labour confiscated the bank on Unreal assumptions as to real value, gave zero compensation and now the "good" and "bad" parts of NR will generate over £ 12 Billion of Surplus to the Treasury after Tax, loan repayments and Interest! This "unjust enrichment" was surely never intended by Parliament and we seek a pledge from Mr Miliband to undo this terrible injustice to 150,000 hard working families, mainly in the North East and Scotland. We are not asking the taxpayer to give us money -- we are asking the taxpayer to share OUR money with us!0 -
Please have a look at my comments below. We have a genuine Case.
Thanks0 -
cosmicobserver wrote: »The Northern Rock bank was not insolvent it was illiquid -- shortage of cash to meet heave demand of depositors withdrawing money....
An illiquid bank is a dead bank.cosmicobserver wrote: ».... On all criteria, NR was a highly profitable, ...
NR made losses in the years 2007, 2008, and 2009.0 -
The estimates of a £ 12 Billion SURPLUS over 15 years have not been plucked out of the air! This projection was publicly stated by the Government UKFI which looks after all the banks in which the government holds a share. UK Asset Resolution and NR Asset Management are Government bodies concerned with the "bad " part of NR. They agree with the 2012cestimate of £ 12 Billion surplus.
If you add the Value Virgin will derive from the "good" part of NR taken over 2 years ago, and for the continuing improvement in the UK housing market you arrive at £ 18 Billion over 15 years (a future value of surpluses). If you want a Net Present Value -- in today's money-- there would be at least £ 10 Billion. Deduct the £ 3 Billion of Capital injected by the Government and you have a NPV of £ 7 Billion which represents over £ 15 per share in our Northern Rock.
We are not seeking a full return of £ 7 Billion and recognise the vital public support provided to NR. We seek to SHARE the huge surplus projected because the Zero value was total injustice that has resulted in "Unjust Enrichment". We say the State deserves to profit for the help given and share the bounty-- but not obscenely at the expense of 150,000 ordinary families (90% pensioners) in the North East and Scotland.0 -
And huge profits from 2010 onwards. Please do not forget the profits prior to 2007!
Please consider that half the losses in 2007 and 2008 were "panic" write downs and disposals that gained value after the market improved from 2009.
An illiquid bank is not dead. All banks rely on LOLR -- it is the cornerstone of Modern Western banking for over a hundred years. Experience suggests that in normal market conditions not all 100% of depositors will want to withdraw all their money at the same time (a Run). NO BANK CAN SURVIVE A RUN.0 -
What were shares trading for before the bank was nationalised and the shares written to zero? Did someone mention 90 pence?
There were a couple of offers put forward - Virgin putting in a chunk of cash for a majority stake and arranging to repay some of the government finance, or the Bank's board themselves who hoped to raise half a billion to keep it going. The Virgin one was vocally opposed by the largest shareholder (RAB).
At that point (Feb '08) the government who had at least £25bn of direct loans and who knows what other finance and guarantees (can't be bothered going into the detail) said neither of the deals offered value for taxpayers, and shares were suspended.
At the end of the day, the bank went down the pan due to a reckless business plan involving financing over 60% of its lending with borrowing on the money markets, two or three or four times the level of other 'failures' such as HBOS, RBS, Lloyds. Whether they had assets or not, they weren't solvent and didn't have the liquidity to keep going without outside help which was not forthcoming. Basically, the company (and its shareholders who appoint the board) had screwed the business which would do very well in booming markets (which is why its price was at one point £12 having listed at only £4.50) but not survive a credit crunch. The credit crunch happened, and it didn't survive.
Yes, some assets might have been good quality and individually attractive, even though other assets were dogs. With billions and billions of capital and some patience, a return could be made if and when markets and credit availability improved. The shareholders didn't have billions and billions of capital, so they lost control and ownership of 'their' business. The government that inserted itself as the only entity on the planet who wanted to rescue it, and had public interest reasons for doing so, is ultimately the party which will be entitled to benefit from a future turnaround in performance which came as a direct result of its own finance.
If the government do get a (speculated by Den) £10bn return on the tens of billions it risked while preserving financial stability, good on it. Clearly the directors and shareholders were deemed incapable of paying the government back its emergency funding and finding the requisite tens of billions of finance for themselves, so they don't get to play.
To complain that if only the government had lent the money in a really friendly way and used public funds to provide stability and letting the former shareholders take the profits from that, perhaps growing their £1 a share back into £10 a share, is rather missing the point. It is true that the government did provide support to other entities in the market to help stave off financial meltdown. Just because someone else later 'got away with' keeping a portion of their company doesn't mean you are entitled to keep a portion of yours which you lost fair and square.
This is probably pretty distressing for someone who had bought into NR heavily through sharesave schemes and not sold out ; those people who were happy to keep their eggs in one basket because greed told them it would be better there than in a balanced portfolio, will have lost a material portion of their wealth.
Some of them would be pensioners and not understand what they had. Some would have been blindly loyal employees who thought if their company let them buy some shares it must be a good thing and could never be worth as little as zero. Unfortunately the mechanics of capitalism means that pensioners or employees who don't understand the pros and cons of bank finance should probably not be direct owners and voters of bank stock to the extent that the moves in the value of that stock could have a profound effect on their lives.
The lessons learned there are now written into the annals of history and available for others to learn from, although it's clear from posts on this board from time to time that there are plenty of people with shares in (e.g. Standard Life or Lloyds) who don't understand what their shares are or how companies really operate and are just holding the shares almost by accident. Financial services businesses are complex. We don't need a public enquiry to tell us that.
If however you think that there was some other entity that could have come along and paid off the government and all other creditors the tens of billions and taken control of the bank in the middle of the credit crisis and paid the former shareholders handsomely for it, I'm all ears. If that is genuinely the case and there was a party waiting in the wings with a suitable offer that nobody got to hear from - perhaps some other world government or oligarch - maybe there should be an enquiry into that. I'm not aware of any evidence for that and if nobody else is, an enquiry into it would seem to be a waste of time.
A 'fair value' is driven by what someone is willing to pay for it if the offer is acceptable to the buyer and the seller. The government which needed its debts paying off had the right to say that someone without the requisite billions would not be giving a good deal to the taxpayer; nobody emerged that could afford to pay more than zero for the shares AND clear all the debts AND preserve financial stability. So, in delisting and compensating shareholders an appropriate figure for the compulsory takeover, it seems the appropriate figure was zero.0 -
Unfortunately, despite bowlhead99's excellent post, I'd wager that the same drum will get banged again.
"A fanatic is one who can't change his mind and won't change the subject" as Churchill once said.
It is a telling tale about equities though. many of the investors will have gotten the shares free and just simply did not know what they were holding. The others bought into them. Some profited, some lost. C'est la vie....that's the risk of investing in equities, and the importance of diversification.0
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