Monday, January 19, 2009

Zero Value

Better than free money for investors.

Jan. 19 (Bloomberg) -- Royal Bank of Scotland Group Plc slumped by the most in two decades in London trading on concern the government may have to take full control of the bank after forecasting the biggest loss ever reported by a U.K. company.

The stock dropped 67 percent, the most since September 1988, to 11.6 pence, paring the Edinburgh-based lender’s market value to 4.6 billion pounds ($6.7 billion).

“Nationalization at zero value is implicit in the price,” said Derek Chambers, an analyst at Standard & Poor’s Equity Research Ltd. who has a “hold” rating on the stock. The stock price “is an option on the vague chance that it doesn’t get nationalized.”

Plenty of companies go under and wipe out shareholders. You can argue that the banking system needs to be preserved, and that even individual institutions need to be preserved in some form, but there's zero reason that shareholders of large banks are special creatures who deserve to be bailed out.