WHAT THE MEDIA SAY: Latest share price trauma for Railtrack

Organisation: Railtrack

Issue: Share price freefall

The fact that Railtrack was once the darling of the stock market, with

rapid growth and a pounds 17 per share value, became a distant memory

last week. A scathing analyst report sent Railtrack stock into freefall,

leaving the company on its knees with a departure ticket from the FTSE


Funding concerns for general maintenance and new infrastructure

development, particularly following the fatal Hatfield crash in October

last year, had already diminished the organisation's share value, but it

was the release of ABN AMRO's sell note that effectively put the nail in

Railtrack's coffin.

ABN AMRO held back no punches as it valued Railtrack stock at 58p per

share: 'The full year results should leave investors in no doubt that

their equity is in danger of being wiped out' (wsj.com, 6/6).

There was a small reprieve for Railtrack as several investment banks

stepped into the fray to assert a healthier share value of between 400

and 600p. ABN AMRO rivals questioned the validity of the report, stating

that it was 'arithmetically flawed' (thisismoney.com, 6/6), had failed

to account for Railtrack's pounds 1.5bn government grant, and presented

only the worst case scenario (sundayherald. co.uk, 11/6).

The frenzied share dealing and analysts' disputes were the outward

manifestation of Railtrack's deeply troubled position. With hindsight,

commentators agreed the company's decline was the result of a

fundamentally flawed privatisation scheme.

The future for Railtrack was less clear. Tony Blair categorically ruled

out renationalisation as an option, despite its apparent popularity.

Ironically, even high-profile Railtrack investors supported the idea of

a partial renationalisation, with the Government taking a substantial

share of Railtrack stock in exchange for funding, which it was hoped

would offer the organisation some financial stability, political

direction and credibility in the debt markets.

Other options included the sale of property assets and partnership with

the regional train operators, which elicited positive responses from

GNER and Virgin.

Two views, however, became fundamentally apparent: that Railtrack must

be the priority for the latest transport minister Stephen Bowers and

that 'doing nothing is no longer an option' (Financial Times, 7/6).

Analysis and commentary by Echo Research. More information can be found

at: www.echoResearch.com.

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