RBS Has 12,000 Reasons To Wish It Had Just Taken That Bailout A Few Months Earlier

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Once, in 2007, the people who ran RBS though it would be a good idea to buy a Dutch bank with lots and lots of toxic assets. It proved to be not so good an idea, so RBS needed to raise some cash. So it sold £12 billion worth of new stock in June 2008.

In the face of a £28 billion net loss it announced a few months later, that fresh capital evaporated rather quickly, forcing a new share sale to Her Majesty's Treasury. The people who bought those £12 billion in shares, unsurprisingly, aren't thrilled about what happened to the value of those shares before and after nationalization. So 12,000+ are suing, seeking several billion pounds from Fred Goodwin & Co., which makes the loss of his knighthood seem rather a bargain.

The RBoS Shareholders Action Group has issued proceedings against RBS, Fred Goodwin, Tom McKillop, Johnny Cameron and Guy Whittaker, in the chancery division of Britain's High Court to recover billions of pounds lost on the value of their shares in the run up to the bank's 45 billion pound taxpayer rescue.

The final claim for compensation could be as much as 4 billion pounds ($6.05 billion), the shareholder group said.

The group, which comprises some 12,000 ordinary shareholders and 100 institutions, alleges that RBS misled investors about its financial health during a 12 billion pound share sale conducted six months before its October 2008 bailout.

It also says that the bank and its former employees omitted to include critical information in the prospectus….

A smaller group of 21 investors filed a claim for compensation on March 28, citing similar allegations of misleading investors and publishing defective rights issue documentation.

Royal Bank of Scotland faces $6 billion investor action [Reuters]
RBS Faces $6 Billion Lawsuit [WSJ]

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