Following Northern Rock’s announcement that the bids it had received were ‘materially below the market value’, share prices plummeted 42 per cent to a record low of 60p a share.
The shares – worth over £12 in February – recovered slightly to 85p, but have fluctuated dramatically since the bank was forced to access emergency funding from the Bank of England.
Chancellor Alistair Darling has been forced to defend the loan – now totalling around £24 billion – stating that the government would only support bids that protected public interests.
It had been suggested that between eight to 10 firms would declare bids for Northern Rock, yet only two public interests currently exist, those of the Virgin Consortium and Olivant Advisers, headed by former Abbey chief executive, Luqman Arnold. However, Cerberus has reportedly pulled out of the running.
Ray Boulger, senior technical manager for John Charcol, said: “The government’s interests are not the same as the bidders’. It is concerned with how quickly the loan will be repaid, but equally it will take a wider response. There is a conflict between taking the capitalist view and a broader view. Ultimately, the government will be calling the shots.”
Jonathan Cornell, managing director of Hamptons International, added: “It is very difficult for Northern Rock to come back, but for everyone concerned it needs to. If it doesn’t, the government has lost a lot of tax payers’ money. The Tripartite doesn’t seem to have worked, because they are just blaming each other.”
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