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What happens with those who were short Northern Rock?
- Thread starter crgarcia
- Start date
Well we're one (more) step closer to this saga finishing:
http://www.brickcourt.co.uk/news/06...al-upholds-nil-valuation-of-northern-rock.asp
"06/10/2011 - Upper Tribunal upholds nil valuation of Northern Rock"
The Upper Tribunal has given judgment upholding the decision of Andrew Caldwell, the Independent Valuer of Northern Rock appointed by HM Treasury, that no compensation should be paid to former shareholders of Northern Rock, on the basis that their shares had no value as at the date Northern Rock was nationalised on 22 February 2008.
Link to judgement:
http://www.judiciary.gov.uk/media/judgments/2011/northern-rock-hm-treasury-tribunal-decision
and PDF file:
http://www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/northern-rock-tribunal-decision.pdf
http://www.brickcourt.co.uk/news/06...al-upholds-nil-valuation-of-northern-rock.asp
"06/10/2011 - Upper Tribunal upholds nil valuation of Northern Rock"
The Upper Tribunal has given judgment upholding the decision of Andrew Caldwell, the Independent Valuer of Northern Rock appointed by HM Treasury, that no compensation should be paid to former shareholders of Northern Rock, on the basis that their shares had no value as at the date Northern Rock was nationalised on 22 February 2008.
Link to judgement:
http://www.judiciary.gov.uk/media/judgments/2011/northern-rock-hm-treasury-tribunal-decision
and PDF file:
http://www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/northern-rock-tribunal-decision.pdf
Lesson - whenever you are short a stock, always place a bid to cover at a very low price. The benefits of closing the short far outweigh the extra fraction you might get by 'covering' at zero.
Quote from Ghost of Cutten:
Lesson - whenever you are short a stock, always place a bid to cover at a very low price. The benefits of closing the short far outweigh the extra fraction you might get by 'covering' at zero.
I agree with you in theory, and in practice this works for most stocks.
ie, they announce bankruptcy and I cover at a low price.
Northern Rock was different. The last price before the trading halt was 90 pence, and if memory serves me correct it didn't trade much below that level in the weeks leading up to the halt.
I was not willing to cover my short at that price - far too expensive for a bank that was about to be nationalised. If it had declined to RBS type levels of 10 pence, then I coulda / woulda covered.
Quote from m22au:
I agree with you in theory, and in practice this works for most stocks.
ie, they announce bankruptcy and I cover at a low price.
Northern Rock was different. The last price before the trading halt was 90 pence, and if memory serves me correct it didn't trade much below that level in the weeks leading up to the halt.
I was not willing to cover my short at that price - far too expensive for a bank that was about to be nationalised. If it had declined to RBS type levels of 10 pence, then I coulda / woulda covered.
Problem with halts is sometimes the broker will screw you by charging you the borrow(And you can't cover). Sometimes to usurious levels. IIRC it happened to the China fraud stocks this year
I don't want to be short a stock that got halted when most of my profit was made already
Quote from Daal:
Problem with halts is sometimes the broker will screw you by charging you the borrow(And you can't cover). Sometimes to usurious levels. IIRC it happened to the China fraud stocks this year
I don't want to be short a stock that got halted when most of my profit was made already
Yes that happened to me with at least one Chinese fraud stock. But when it finally reopened I covered at such a massive gain, it more than made up for the short interest I was charged.
And at least for the China stocks they were typically only halted for 3 months. Northern Rock has been over 3 years and counting.
***
edited to add:
The Bloomberg story earlier in this thread (dated 17 February 2008) says
"The stock closed at 90 pence on Friday, valuing the company at 379 million pounds."
www.bloomberg.com/apps/news?pid=newsarchive&sid=aR399_tyWImw
There was no way I was going to cover my short at a market cap of 379 million pounds. Far too expensive for an insolvent financial company.
Quote from m22au:
I agree with you in theory, and in practice this works for most stocks.
ie, they announce bankruptcy and I cover at a low price.
Northern Rock was different. The last price before the trading halt was 90 pence, and if memory serves me correct it didn't trade much below that level in the weeks leading up to the halt.
I was not willing to cover my short at that price - far too expensive for a bank that was about to be nationalised. If it had declined to RBS type levels of 10 pence, then I coulda / woulda covered.
Yeah I wasn't meaning to criticise you there, just was a general tip. MF also delisted >$1 per share. Unfortunately sometimes you get the shaft with these blowups.
Quote from Ghost of Cutten:
Yeah I wasn't meaning to criticise you there, just was a general tip. MF also delisted >$1 per share. Unfortunately sometimes you get the shaft with these blowups.
No worries at all.
The good thing with US blowups (apart from the Chinese frauds as mentioned by Daal above) is that they usually "relist" them quickly on the pink sheets. Eg. today MF Global will start trading on the pink sheets.
Hopefully this Upper Tribunal decision is "the" final appeal to end all appeals. And hopefully it means that I get to collect my "zero" in the coming weeks and months.
Quote from m22au:
No worries at all.
The good thing with US blowups (apart from the Chinese frauds as mentioned by Daal above) is that they usually "relist" them quickly on the pink sheets. Eg. today MF Global will start trading on the pink sheets.
Hopefully this Upper Tribunal decision is "the" final appeal to end all appeals. And hopefully it means that I get to collect my "zero" in the coming weeks and months.
Which broker you used and did they charge you to keep the short for so long?