OMG, how tempting is it to buy Northern Rock? Shares have plummeted by 24% this morning and they’ve already halved in the last 12 months.
They’ve been hit hard by the US credit crunch, but how does that affect NR? They can’t borrow money as cheaply any more and so their turnover will drop.
But it’s likely that LIBOR will revert to somewhere much closer to the base rate within a few months and NR should be able to compete again.
Then it’s going to look seriously cheap. It still has tonnes of customers. It’s not going to go bust and the BoE are lending it money, not to stop it going bust but to allow it to trade like it has before.
I think it’s a dead cert for a knockdown-price buyout by some other cash rich predator. Buy some shares in NR now!
(Update 2007-09-20: Hmm, it get’s worse for NR, shares crashing big time. Looks like the underlying value of the company is much less than I first thought and reinforces the sense of making your valuation calculation *before* buying shares in a company.)
