Another drop in Northern Rock shares

Following the turmoil and chaos that took hold in September of this year, high street lender Northern Rock has seen its share prices plummet yet again, this time falling to their lowest level yet.

According to recent reports shares in Northern Rock, which were worth £12 back in February of this year, fell to under £1 per share on Tuesday. This comes in the light of concerns over whether the bank will be bought out, as although there have been a number of potential purchasers there has been no firm offer as yet.

The serious woes faced by Northern Rock began in September, after it became widely known that the lender had approached the Bank of England for an emergency loan of billions of pounds. Once this became public knowledge, savers flocked to the bank to withdraw their savings amidst worries that the bank was about to fold, and over the space of several days over £2 billion was withdrawn from the bank.

Share prices also plummeted, and Northern Rock gained a reputation as one of the highest profile victims of the credit crunch and the turmoil that has swept across the financial sector.

One bank official stated: ‘Based on the information it has so far, the board of Northern Rock believes that the range of values for the existing equity implied by the proposals is materially below the market price at the close of business on Friday.’

Chairman Bryan Sanderson added: ‘The value to shareholders from any proposals… remains highly uncertain and will be dependent, among other things, on when and if there is an improvement in market conditions including access to liquidity and the value created, if any, from the run-off of the assets and liabilities remaining in the company following any disposal of all or part of its business.’

Tom Smith
25th November 2007

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