Fevered stock market trading saw shares in crisis-torn Northern Rock drop as much as 20% today to an alltime low of 2461/4p. That is less than a fifth of their value six months ago.
At one point today, the share price had surged to 335p - a gain of almost 9% - as investors decided the former building society is not going bust. But the mood turned rapidly, sending them down 16p to 290p.
Northern Rock revealed that its two largest shareholders have cut their losses and sold large slugs of shares at the same time that rumours swept the market that a massively cut-price bid is on the way.
Last Friday morning Northern Rock was valued at £2.7 billion. Today its worth had fallen to £1.1 billion, and traders were talking of a rescue bid worth less than £1 billion.
Lloyds TSB was rumoured to be preparing an offer at just 200p a share, but that was denied by sources close to the bank. The even more fantastical suggestion that Halifax owner HBOS would bid just 100p a share for Northern was equally strongly denied, with sources pointing out that HBOS has never been involved in takeover talks and did not intend to start.
Analysts are convinced the bank cannot survive independently, but are also sure that every extra day it takes to find a buyer reduces its value. Northern Rock will almost certainly have to start drawing down the Bank of England's emergency credit facility within the next two days.
That will not only be another blow to its credibility but also to its finances, since the Bank of England is charging it a punitive interest rate of just above 7%.
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