What Can Northern Rock Shareholders Expect?

Northern Rock shareholders face the possibility of walking away with nothing after the U.K. government decided to temporarily nationalize the struggling mortgage lender.

And shareholders could take legal action in an effort to secure compensation.

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Shares in Northern Rock were suspended Monday. Chancellor of the Exchequer Alistair Darling said an independent auditor would determine how much shareholders should get, but the bank would be valued as if it had not received any government support, indicating a minimal payout if anything.

Dr. Roger Lawson from UK Shareholders Association said the nationalization of the bank to be the worst possible solution, and a clear attempt from the government to put more money in its own pockets.

"It's more like a thief saying to you 'I'd rather steal from you than enter into a commercial transaction because it's better for me,'" Lawson told CNBC.

"This is a very sad day for the stock market, banking industry and the reputation of the UK as a financial center," Jon Wood, head of hedge fund SRM -- which is Northern Rock's top shareholder with an 11.5 percent stake -- told the Financial Times.

"Legal action (from shareholders) looks almost inevitable," said James Hutson, analyst at brokerage Keefe, Bruyette & Woods.

Robin Ashby from the Northern Rock Small Shareholders Group was also frustrated by the government privatization plan, which has not happened with a major UK company since the 1970s.

"Small shareholders on behalf of whom I speak have basically been impoverished by this nationalization and they certainly don't have the cash to go through years of litigation,” Ashby said.

Fair compensation would not be the 12 pounds per share at which the lender was trading at this time last year, but a more reasonable amount such as compensation of 5 pounds a share, Ashby said.

Hedge fund RAB Capital, the second biggest shareholder next to SRM, declined to comment Sunday. 

-- Reuters contributed to this report