Day Trading & Forex Forum

just_pondlife

I got a few shares in northern rock, if they get bought out,all well and good; hopefully they will go up and i will get my money back.

My question is this! what happens to my shares if the company is nationalised?

Thanks Kev. ( yes, i know, should have ditched them ages ago!)

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Just a squirrel trying to get a nut!!!

Jack o'Clubs

they go to zero.

see Railtrack for a similar example...

if I were you I would sell now: on a risk adjusted basis I'd say that they're overvalued: I certainly don't see anyone queuing up to offer more for the equity than its current valuation.

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The pessimist complains about the wind, the optimist waits for it to change, the realist adjusts the sails.

just_pondlife

do I still have the shares, and they have to gain value again, or do i just loose my money because i have no more shares?

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Just a squirrel trying to get a nut!!!

Jack o'Clubs

no, you lose the shares. The government would own the company, not the shareholders, or to put it another way, they would be the only shareholder.

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The pessimist complains about the wind, the optimist waits for it to change, the realist adjusts the sails.

shadowninja

That's annoying. Then again, buying shares in NRK was hellishly risky in the last month. I know quite a few guys through different forums who thought they were cheap at 300, 250, 150 etc. Every time it moved and I got tempted, I just muttered the first line in my signature!

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The markets can stay solvent longer than you can stay irrational.


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arabianights

This is a very interesting question that has been studied many times in behavioural economics, whether to take a certain loss versus gambling with a possibility, and expectancy, of even greater loss to try and get out of the losing position. It turns out that humans are not at all rational here, I can expand upon this if anyone is interested as the results are very important for trading.

The rational thing to do would be to subtract your transaction costs if you were to sell from the current price. If you would not buy the shares at this price then you should sell them.

shadowninja

Problem with this way of thinking is that people then do the averaging down trick...

__________________


The markets can stay solvent longer than you can stay irrational.


Check out my blog if you're new to trading or skip the advice and obtain fame and riches beyond your wildest dreams the easy way but you might end up a bit like this.

arabianights

Well yeah, averaging is a great plan using this logic - it's a way to get filled for a bigger position at a better price. Of course this logic in both cases ignores risk. If you average then you are increasing your risk, which makes it less attractive than the logic would suggest, but if the OP were to sell his shares he would decrease his risk, which actually makes selling them slightly more attractive than my analysis would suggest.