After an electronic vote during Tuesday morning’s EGM, the Rock revealed on its website (several hours later, for some reason) that only one of the hedge funds’ four proposals was carried - to limit the board’s power to issue new shares. The other three proposals – which would have blocked the board from selling off assets or changing the capital structure without shareholder approval – failed, but only just. All three needed a 75% majority, and all three received about 65% of the vote.
About 650 of the Rock’s 180,000 shareholders – and almost as many over-excited financial journalists, judging by the coverage – turned up in the Newcastle drizzle on Tuesday to hear chairman Bryan Sanderson fight the board’s corner against SRM’s Jon Wood (who impressed) and RAB’s Philip Richards (who didn’t).
The chairman, who was parachuted in after this whole debacle started (and doesn’t even own shares in the Rock), said that it was ‘important that everyone with a stake acts responsibility’. The hedge funds’ proposals, he insisted, were ‘more likely to hamper the board's ability to rescue the bank, than to help it’. Stressing the importance of keeping jobs in the North-East, he raised a smile by suggesting that he had the second hardest job in Newcastle, behind the team’s football manager – though as the former Sunderland chairman, he’s not likely to have a big following among Geordie football fans.
But the hedge funds, described as ‘predators’ by Lib Dem rent-a-quote Vince Cable yesterday, were not to be denied. Richards claimed their intervention had ensured that shareholders got a say in the bidding process, and suggested nationalisation would just lead to a ‘slow fire sale’, while Wood played the populist card, thanking employees and blaming the whole fiasco on Mervyn King (for snitching on the Rock in the first place). The Rock was still ‘a great bank’, he claimed (somewhat optimistically).
With other shareholders also giving Sanderson a hard time – ‘We need you kept on a short leash,’ said one – the chairman was probably nervous that he could lose the vote altogether. As it was the damage was limited - while he and his four fellow directors were re-elected almost unanimously.
But the respite could be short-lived. Although the government would love a private bidder to buy the Rock (rather than adding a £100bn liability to the public balance sheet), not even Goldman Sachs’s financial whizz-kids have been able to find a way of raising the funds so far. That leaves nationalisation as the most likely option – and since this would wipe out the value of his shareholders’ equity, that won’t go down very well...