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Sunday, 7 October, 2001, 19:21 GMT 20:21 UK
Gloom for Railtrack shareholders
Railtrack share price graph
Railtrack shareholders are unlikely to get much money back now the company is in administration, experts say.


(Shareholders) may get some residual value out of the shares but I wouldn't be hopeful

Justin Urquhart Stewart, 7 Investment

Trading in the company's shares will be suspended when the London Stock Exchange reopens for business on Monday.

The administrators, Ernst and Young, now have to decide how much, if any, money more than a quarter of a million of shareholders will get.

Railtrack's creditors, the people it owes money to, will have to be paid before shareholders see any return.

Rise and fall

Anyone who bought Railtrack shares when the company was originally floated, and has held on to them, will have witnessed a huge change in fortunes.

After floating at 380p in May 1996, the shares started a steady rise, peaking at over 17 in November 1998.

But as Railtrack's problems increased the share price slid back, and on Friday it closed at 2.80.

With the company in administration, those put in charge of the firm will concentrate on paying creditors first.

Poor prospects

Shareholders are "at the bottom of the pile" when it comes to paying money out in this situation says Justin Urquhart Stewart of 7 Investment Management.

And the prospects of Railtrack shareholders receiving anything like the value of their shares are bleak.

"They may get some residual value out of the shares, but I wouldn't be too hopeful," Mr Urquhart Stewart said.

This is a view shared by Jeremy Batstone, head of research at NatWest Stockbrokers.

"(Shareholders) stand every chance of getting very little," he said.

The government could choose to reimburse shareholders, but Mr Urquhart Stewart thinks the chances are slim.

"There's no particular reason why the Government should be generous to Railtrack shareholders."

He says it is all part of the risk of being a shareholder.

"You are part owner and part risk-taker - in order to take the profits you have to take the risk," he said.

Investor reaction

David Bigg, who put 3,000 into Railtrack when it floated in 1996, said: "I am pretty gutted. I did not anticipate it would happen.

He added: "We went to the agm of Railtrack in York in July, there was no hint then of an imminent collapse.

"I met rail mangers privately two weeks ago and there was no hint then."

Another small shareholder, Paul Krebbs, said: "I did not expect to make money in the first year (after flotation).

"It was a surprise how much money the shares went up by. But we know now that was a sham, a fake," he told BBC Radio 4's Today programme.

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