Troubled Northern Rock shares slip again
Northern Rock shares were back under pressure today amid speculation that the troubled bank had received takeover offers worth less than £1 billion.
The stock went into reverse with a drop of 16% to 257p, putting back the tentative gains seen yesterday and earlier today.
The sell-off came as traders digested rumours that Halifax Bank of Scotland wanted to buy the business for 100p a share, equivalent to £421 million, while Lloyds TSB had offered 200p a share, valuing it at around £842 million.
Northern had been worth around £2.7 billion on Friday morning, prior to its emergency request to the Bank of England on Thursday night.
David Buik, of Cantor Index, said traders appeared to think “the sale value of the business is not worth the current share price”.
The FTSE 100 Index was 2% higher, mirroring the gains seen for the Dow Jones Industrial Average and Asian markets after the Federal Reserve announced a half percentage point cut in rates to 4.75%.
The Fed’s move was aimed at boosting confidence in the fragile US housing market, which has been at the heart of the recent credit crisis after a surge in defaults in the country’s sub-prime mortgage market.
Matt Buckland, a trader at CMC Markets, said: “Even though this move by the Fed is unlikely to remove all the sub-prime mortgage concerns in one go, it may at least help bring some stability back to the financial services sector.”
Northern Rock recent gains came after Chancellor Alistair Darling guaranteed all of the ailing group’s deposits on Monday night. Alliance & Leicester also retreated into negative territory today after earlier standing as London’s top riser.
