Northern Rock: Judicial Review

Northern Rock: Judicial Review

A group of 150,000 of Northern Rock’s small private shareholders have filed an application for a judicial review of the compensation terms being offered by the Government.  One of Northern Rock’s biggest shareholders, SRM Global has also filed a similar application.  

Shareholders are arguing that the compensation terms should be fair and based on the normal approach taken in any commercial valuation of a business.  They also say compensation should be decided by an independent expert.  The group claim the Government’s nationalisation of Northern Rock was aimed at enabling the Treasury to make a substantial profit in due course.  

Our view

This is very difficult.  If you own shares in a company and it goes bankrupt your shares are worth nothing.  Why should Northern Rock be any different we ask? The action group is saying that “many smaller shareholders do not seem to have realised that the Government is intent on paying them nothing”.  Our view is “and?”

No buyer could be found for Northern Rock and as a result, the Government had to step in.  No support was offered to Marconi shareholders when their value went to next to nothing, why should Northern Rock shareholders be different.  We do not believe this action will be successful, if Government did it for one they would have to do it for them all.  The reality is that people buys shares knowing the risks.

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