What happens to bank shares if the banks are nationalized? November 8, 2009
Posted by Banking in : Economics , trackback
If the UK government did nationalize several British banks, what would happen to the shareholders?
If shares are not suspended, are they likely to increase or decrease?
I’m thinking they would increase….Submited by:Carefree
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If the government completely nationalizes a bank, the existing shareholders will lose their entire investment. However, you should expect that the government only nationalizes British banks in part. In this case, existing shareholders’ equity positions will be diluted, but there shares will still have some value.
Whether the share price will increase or decrease depends on how successful the government’s capital infusion will be. If the current share price reflects default risk and the equity infusion makes default less likely, it it quite possible that the share price will increase.