So what does “material” mean in the context of Northern Rock?
In traditional City-speak – in the language of market-guidance and the like – material has been assumed to be something in excess of 20 per cent (while the word “significant” alludes to a figure around 10 per cent).
But what do you say if the numbers involved are in a different ball park altogether – as is now the case with this stricken mortgage bank?
On Tuesday, JC Flowers made it known that it believed Rock needs a £1bn injection of pure capital, and that the private equity group was willing to provide this at a “nominal” value- raising the spectre of new stock being issued at the nominal price of Rock’s issued equity, which is 25p.
On Wednesday, Rock published a formal statement:
The Board of Northern Rock confirms that, following its announcement on 19 November 2007, the Company has received additional indicative expressions of interest covering a range of options for the business, one of which does contemplate an offer for the Company materially below the market price at the close of business on Tuesday, 20 November 2007.
So after Tuesday’s price fall, when enthusiastic sellers of Rock stock sent the quote as low as 60p at one stage, we now seem to have formal guidance from the bank itself that this was the correct thing to do.
Those brave buyers who pushed the price back up towards 100p are mis-guided, Rock is saying.
This bank is trying to manage down its own share price.
The stock fell 15 per cent again at the opening on Wednesday.
Only another 60p or so to go…