Compensation hopes for Bradford & Bingley shareholders
Bradford & Bingley shareholders may be able to claw back some of the money they lost following the nationalisation of the bank in September.
Under the terms of the compensation order, the value of B&B’s shares should be based on what the lender was worth immediately before its mortgage book fell into government hands and its savings arm was sold off to Santander on 29 September.
“The amount of compensation payable to a person shall be an amount equal to the value immediately before the transfer time of all shares in B&B held immediately before the transfer time by that person,” the order states.
An independent valuer, appointed by the government, will decide the level of compensation due to around one million small shareholders. However, if it does decide B&B was on the verge of collapse, investors could end up with little cash in return for their holdings – and months of uncertainty.
The group’s shares closed at 20p on Friday 26 September, putting a £256 million price tag on the stricken lender, a massive slump from the 300p the shares changed hands at a year ago.
However, B&B shareholders stand to gain more than those with money invested in Northern Rock. The government sparked outrage earlier this year by announcing the lender would be valued on the basis that it was "unable to continue as a going concern" and that it was "in administration" when it was nationalised.
Two hedge funds, SRM Global and RAB Capital, which both held large stakes in Northern Rock are taking the government to court over the terms of the valuation. The judicial review will be heard in January.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
A sophisticated absolute return fund that seeks to make money for its investors regardless of how global markets are performing. To that end, they invest in shares, bonds, currencies and commodities using a raft of investment techniques such as gearing, short selling, derivatives, futures, options and interest rate swaps. Most are based “offshore” and are not regulated by the financial authorities. Although ordinary investors can gain exposure to hedge funds through certain types of investment funds, direct investment is for the wealthy as most funds require potential investors to have liquid assets greater than £150,000m.