Anyone have an idea what happens to the stock price of a company that is nationalized?
I can think of two scenarios:
1) Price goes up because of government backing.
2) Stock price falls because government might force some divisions to shut down which might be profitable yet very risky.
it depends if they wipe out the equity or not... isn't that the million dollar question?
thought it was obvious... maybe not
Well, if it is an actual "nationalization," there is no more stock trading. Bank nationalization is not that infrequent, it just usually refers to smaller failed S+L's that are seized by the FDIC. I'd suggest looking at some of those for US precedent. You could also look at the nationalization of Israel's banks in 83 or France in 82. My understanding would be the government buys the stock at market value - considering the government traditionally only comes in when a bank is insolvent, that would mean equity holders get close to nothing. I'm not sure what the procedure would be for citi, but I for one would not feel too comfortable holding their stock.
so what would the effects of that be on a short position on the stock?
Short BAC and C. You'll thank me later.
If nationalization occurs, they have very far to fall. I would expect them to trade for cents, not dollars.
I think they might consider adopting the method used by Nordic governments in the early 90s when banks were nationalized; shareholders were wiped out, got rid of the bad assets, and new management.
And then privatize the banks again...
i'm long SKF
Read the Overheard section from the WSJ yesterday on the Money & Investing section. Surprised no one made a bigger deal about those graphs.
If the US Govt were to convert its TARP funding of those banks into common equity, the Gov would already own 66% of BAC and 74% of C.
Those were the market values as of two days ago. Take where BAC and C are now and those %s are considerably higher.
Basically, C and BAC almost have no equity value as they currently stand.
If that were true, wouldn't the options be a better play?
If they nationalize these POS banks, the investors are fucked. Zero equity.
wow my skf position just went in the red for the day... financials rally on its way
Ive used SKF as my hedge and played individual stocks up and down...there was a nice 25% pop on BAC today if you go in near the lows
Since we are young and have more money than most people our age i see no reason not to throw caution to the wind and dabble in speculation (although im still 70% cash at this point)
SFI has been another interesting play I agree that BAC and C may see a near term pop and that nationalization is not an option im getting my riot gear ready shts about to get crazy
A lot of the pictures and graphs used by journalists have contributed massively to scare mongering.
Don't know if it's already been mentioned, but their debt goes through the roof.
Just my 2c.
long BAC preferred, short common.
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