Northern Rock shareholders go to court
Northern Rock shareholders seeking compensation after the bank was nationalised last year have taken their battle to the High Court.
Around 150,000 private investors along with hedge funds SRM Global and RAB Capital will argue that they stand to lose out on compensation because the Treasury acted on false valuation criteria when the takeover went through.
This, they say, violates article one of the European Convention on Human Rights. Legal & General, which owned shares in the bank, is also backing the case.
Shareholders say the Treasury’s criteria for the valuation of shares assumed the bank was in administration, was no longer a going concern and was not receiving financial support from the Bank of England or the Treasury when it was taken under the government’s wing last February.
However, the shareholders maintain financial assistance is in fact in place and it is a going concern, having paid back almost £4 billion of the public money borrowed with the rest on target to be repaid by 2010. It is also not in administration, they say.
Investors claim that each Northern Rock share was worth at least £3 at the time the bank was nationalised, based on the calculations of the valuation expert they appointed. However, if the bank is deemed to be in administration and its financial assistance withdrawn when the government took it over, the shares are effectively worthless.
The case is scheduled to last for three-and-a-half days with the final decision due in six weeks' time Angry demonstrators, mainly from the North East, have taken to the streets of London to vent their anger.
Many believe the government intends to float Northern Rock in a few years time, a move which could net it as much as £3 billion while shareholders end up out of pocket.
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.