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Sunday, November 25, 2007

Rock Shares Set To Collapse

I don't think it requires any skills in finance, or clairvoyance, to predict that Rock shares will fall through the floor tomorrow morning.

"A consortium led by Virgin Group plans to launch a deeply discounted share placing for Northern Rock that would value the beleaguered bank’s shares at less than half the current price.

Under the Virgin plan, Northern Rock's shares would be valued at between 20p and 40p. Virgin would inject a total of £1 billion in cash as well as its Virgin Money operation, worth between £200m and £300m, into the bank and take a controlling stake.

On Friday, Northern Rock's shares closed at 86p, valuing the bank at £361m. But the revelation of the discounted placing will put further pressure on the company's share price this week.

However, the Virgin proposal, which has financial backing from Royal Bank of Scotland and Citi, appears to have won support from the Northern Rock board. Virgin and the private-equity group JC Flowers are now the two front-runners to take control of the stricken mortgage bank. A preferred bidder could be announced within days

Source The Times.

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