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The Royal Bank of Scotland Group plc Message Board

  • rexobXIP rexobXIP Jan 23, 2009 2:35 PM Flag

    disconnect from common

    I would appreciate any insight anyone has to offer on the disconnect between how the preferreds are trading relative to the ordinary.

    After a terrible tuesday, the ordinary has been relatively flat.

    On the other hand, the preferreds have continued to tank.

    Given that the UK Gov is in the process of converting their preferreds to ordinary, this means more dilution for the ordinary.

    If the bank gets nationalized, and there is any shareholder value, preferreds get paid off before ordinary

    I am assuming that the current valuation anticipates the dividend being cut -- still these are trading for 10 cents on the dollar. Even if you did not get a dividend for several years, but then they resumed, these would offer good value -- especially with a par value of $25, a tenfold upside.

    If the market says the bank is going to fail, what is propping up the ordinary?

    Can anyone explain this action?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Previous poster indicated there was low volume in the prefs. In that type of mini market with a much larger number of sellers-in relative ratio-and few buyers the mkt prices can drop rapidly. The "tail wagging the dog scenerio. That may be the case here for the prefs.

      The common ever since the removal of the divi and price drop seems to have become the home to the day trader, hedge fund and short artist. The instutional, investment and long holder of the common are gone.

      • 1 Reply to starboater
      • Agree....... regarding the Preferreds... yes, there is many more sell orders than buys.... And in a thinly traded security.... this drives the price down........ but the question that remains is WHY is there all this selling pressure.

        What does someone know that we don't? Volumes are fairly stong again today (greater than 10 day moving averages)... Someone is unloading

        For every trade there is a buyer and a seller.... but many more sellers.... willing to sell at a very depressed level.....

        Technically...... not looking very good at all.

    • The ordinary are not being propped up. They had fallen on hard times before it hit the pref stocks. The common was not long ago $18, then along with the pref last year, it tanked and lost 80% of its value. It was hovering around $1 and was afraid of being delisted or raising capital so they did a 20-1 reverse split. The stock was $20 again but got beaten down to $12 fast before the last rally. Now the common is back under $4 and to get the true value divide it by 20! Do not compare the common price vs the pref...apples and oranges.

 
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