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Following a succesful launch, Northern Rock shares dived at the turn of the millenium but made steady progress for the next 6 years. From a low of below 300p they climbed by 400% over the 6 years to reach over 1200p. However the story for the next year was a mixed one, going down to 1000p before recovering to £12 again. The outlook in the banking sector is far from clear .
With problems in the sub-prime market in The States, Northern Rock has been seen as the most vulnerable of the UK mortgage institutions. These problems led to the Bank of England having to intervene to prop up the bank. Although many people withdrew their cash, there wais no likelihood of Northern Rock going bust. The government, other banking institutions and the bank of England won't let that happen.
Further bad news has followed the initial problems with savers still rushing to withdraw funds, and share prices falling further. Early afternoon on 17th September saw the Northern Rock share price reach a low of 272p before closing at 282p. After trading on 17th September the chancellor Alistair Darling committed the government to cover any potential losses of existing funds in Northern Rock. Effectively there now seems no point in savers withdrawing their funds and to spend time queuing outside branches is now a waste of time. Of course there is no such guarantee for the value of people's shareswhich continued to fall.
What happens to my Northern Rock shares if it is privatized?
Whilst the government have announced that Northern Rock will be "temporarily" privatised, it has given no assurances as to the position of shareholders. Trading has been suspended on the Stock Exchange. The price at the time of suspension was 90p per share. However it is unlikely that shareholders would get this value. If any payout were to be calculated on the basis of the value of the company without the Government guarantee, shareholders would get nothing. As it is the government may choose to make a payment to share holdeers to avoid a legal battle.
NOTE: This website is for information only and should not be relied on for making financial decisions. Get advice from your stockbroker or IFA.
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