Small shareholders urged to fight back

Oct 2 2007 by Paul James, The Journal

A CALL to arms was issued last night for small shareholders in Northern Rock to band together – as stock in the bank hit a new record low.

On the 10th anniversary of its stock market flotation, the bank’s shares tumbled more than 26%, or 47.1p to 132.1p.

And amid uncertainty over any looming takeover bid, a Newcastle businessman launched a new collective for customers issued shares when the Rock went public in 1997, or who have invested in recent weeks to show their support for the bank and its 5,600 staff in the North-East.

PR agency boss Robin Ashby, recalling the days of the North-East Small Shareholders Association, said those with stakes in the Rock had an important voice that needed to be heard.

In the event of a takeover, he said current small shareholders would be dispossessed, with virtually no compensation, and robbed of their future stake in the business.

And inviting others to join the Northern Rock Small Shareholders Group, he said that if the business has to be sold, the group would fight for it to continue as a going concern.

The previous record trading low for Northern Rock’s shares was 159p, on September 25. The shares closed at a record low of 163.1p that day compared to the record highs of more than £12 earlier this year.

And yesterday analysts predicted the mortgage lender would slump to losses of more than £100m next year and said it was also facing the prospect of a cut-price takeover, with potential buyers including hedge funds Cerberus and JC Flowers.

The company’s stock market woes came as Prime Minister Gordon Brown and Chancellor Alistair Darling sparked a new political row over the Northern Rock situation when they unveiled reforms designed to protect savers in the event of a banking collapse.

Mr Ashby, 60, from Gosforth, said: “I’m a depositor and a shareholder, as are several other members of my family. It seems to me that the Government and the Financial Services Authority are intent on an arranged marriage for Northern Rock, as fast as possible.

“All these people who have shares either because they were savers when it was demutualised, or people like me who bought in to help share price – these aren’t fat cats, they’re not speculators, they’re not people who are selling the company short.

“They are going to be severely disadvantaged if this sound business is sold off. If I could raise £8m, I would buy it.

“The Government is trying to force through the sale of that sound business to someone who will then get the long-term profit out of it. Small shareholders will get nothing out of it and some sort of voice needs to be raised. It’s a voice that deserves to be heard.”

Mr Ashby praised The Journal’s “fantastic campaign” in support of Northern Rock, which has sought to highlight the importance of the 5,600 regional jobs it provides and the work of the Northern Rock Foundation, which has donated £175m over 10 years to good causes in the North-East and Cumbria.

He added: “The Northern Rock Foundation is a jewel in the region. If somebody buys the assets of Northern Rock, that is worthless.”

Richard Slack, principle lecturer in accounting and finance at Northumbria University, said: “I thought the share price might have got to the point where it was low enough for there to be a natural balance back. It’s a shame because it’s come on the 10th anniversary, nine and three quarters of which showed fantastic growth and great commitment to the region.”

He added: “The board’s duty is always to act in the best interests of its shareholders. If a small body of shareholders didn’t want to sell, they could say so. If, however, the potential acquirer were to take majority control, then it were to acquire more than 90% of the share capital, then it would be a forced sale.

“But in any takeover situation, the board is charged to take in the best interests of its shareholders.”