Northern Rock - Shares [Merged Threads]

Burlesque_Babe

I'm not sure the details of the 25p share purchase have been released yet, I've not seen anything, but others might have.

codger

Motley Fool report:

...is Rock stock now a buy?
Before trying to answer that, here's a quick snapshot of the intended deal:

A consortium comprising Virgin Group, Wilbur Ross, Toscafund Asset Management and First Eastern Investment Group propose to pump in £650m cash plus the Virgin Money business, which it values at £250m. The combined group would be renamed 'Virgin Money' and stay Newcastle-based, with no break-up and few job losses. Howay the lads!

A further £650m would be raised by selling new shares at 25p each via a rights issue to existing shareholders.

If the latter don't choose to part with any more money, the consortium will arrange for the issue to be fully underwritten, so that the Rock gets the loot anyway.

But back to the big question...

The pre-announcement stock market value of the company was around £360m, based on 421m shares in issue.

Even guessing that the market was being too tough on the Rock and that net assets might be worth up to three times that amount, i.e. around £1bn, the new overall worth including add-ons would only rise to £2.6bn.

Though what about the equity? Throw in the stock to be issued for Virgin Money, plus the £650m of consortium cash, with the contribution to be stumped up by existing shareholders or their underwriters, all at 25p a go, and what have you got?

More than 6bn additional shares.

Net result: a value no higher than 40p each.



:eek:

codger

Whoops!

Meant to add, the link to the full article is here:

http://www.fool.co.uk/news/investing/company-comment/2007/11/26/rock-shares-worth-no-more-than-40p.aspx


So that's a ringing endorsement, then. . .

Aegis

littlesaint wrote: »

Since posting yesterday, I've done some reading. I was under the impression that my shares would be devalued, what I didn't realise was how much by. Here was me thinking that I'd have a share in much less of the company - I didn't realise that if existing shareholders do not take up the discount share options they will only hold 6% of the company. I was basing my response on the assumption that existing shareholders would hold between 20 - 33% of the company.

Still, it's better than nationalisation or administration. But I would have to find my share certificate before selling - that's one of the things that prevented me from doing this earlier!

It seems that the amount of the company that you own will be reduced to about 1/7 or 1/8 JUST by the new issue to existing shareholders. On top of that, the new issue of shares to Virgin will turn what existing shareholders currently own from 100% into 45% if I remember my figures correctly. This seems to fit nicely with your calculation that existing shareholders would have close to 6% of the company left in their hands if they didn't pump in extra money to keep the Rock afloat.

Essentially it means that unless you're willing to pay somewhere between £1.50 and £1.75 for each share you own in NRK, your shares will devalue to the point where they're worthless compared to what you paid for them.

baby_boomer

Aegis wrote: »

Essentially it means that unless you're willing to pay somewhere between £1.50 and £1.75 for each share you own in NRK, your shares will devalue to the point where they're worthless compared to what you paid for them.

Which makes yesterday's and today's rises somewhat puzzling.

bristolleedsfan

baby_boomer wrote: »

Which makes yesterday's and today's rises somewhat puzzling.

"rises" ( which are only reversing a minute level of the previous declines) reflect feeling that NR has some value, some investors that sold previously are rebuying, ( so as to be able to buy newly issued shares at 25p each probably thinking they being offered something for nothing)

SRM have bought 6.97 million shares.

http://www.iii.co.uk/investment/detail/?display=news&code=cotn:NRK.L&action=article&articleid=6412650

investors are clearly hoping that someone comes along and trumps virgins offer. ( virgins plans do not included the share price being at its current level, the earlier poster who bought at 97p a share will probably find longer he/she hangs onto the shares the less clever the purchase will be with benefit of hindsight)

ive seen it said elsewhere that their is suspicion that someone/something is keeping NR share price up atm as the share price normally goes down towards the end of the day but last two days its hardly budged.

some chat about NR here http://www.iii.co.uk/investment/detail?code=cotn:NRK.L&display=discussion&it=le

Aegis

baby_boomer wrote: »

Which makes yesterday's and today's rises somewhat puzzling.

Dead cat bounce as shorters close a lot of their positions, maybe? That and the fact that most private investors probably won't have done the calculations properly. I saw someone who was convinced that his overall share cost was going to be offset by gains in the new (i.e. post right issue) shares until 500p per share was seen in 3 years time. That's a predicted rise in value of over 1200%. Needless to say, I didn't agree with his predictions, as that would give NRK a market cap of over 10 times its best ever figure! (which would be equivalent to a price of 150p or so at an 8:1 dilution ratio for the new shares, i.e. ignoring all the shares Virgin are going to purchase).

I really do have a lot of sympathy for the people I've seen who are absolutely 100% behind NRK to the extend that they're now investing almost solely in them with as much as they can spare. Those ones are going to be the real sufferers, as they will not be able to make good use of their right to buy the new shares and will therefore see a horrendous reduction in the value of their investment unless they find themselves able to sell their rights issue, which would probably still not be enough to get anywhere close to breaking even.

It's a betting game for those with plenty of liquid assets right now...

baby_boomer

Aegis wrote: »

I really do have a lot of sympathy for the people I've seen who are absolutely 100% behind NRK to the extend that they're now investing almost solely in them with as much as they can spare.

I can't hardly believe such mad people exist :eek:

If you do know any, please do have a quiet word to redirect them to Planet Reality.

No-one should have all their savings in one share, let alone those who can't afford it, and in this share of all choices.

digitaltoast

Have any other shareholders heard anything since the nationalisation of NR?
Shouldn't we have got some paperwork by now!?

going2die_rich

digitaltoast wrote: »

Have any other shareholders heard anything since the nationalisation of NR?
Shouldn't we have got some paperwork by now!?

No, your shares still need to have their value determined by an "independent panel". It's taking time as it's difficult to determine due to all the decimal places the share value goes back. Even if you had thousands of shares, I wouldn't hold your breath for much more than a of couple hundred quid.

Moral of the story - don't buy shares in a business that uses a frog to promote it!