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What economic rationality is behind this transaction: They purchase at c.500p in fall 2008 and spring 2009. There has been no dividend. The likelihood for dividend appears to be when economy improves, or rates normalise and financial markets recover; investment banking profits will rebound in addition to the lending margin.

Why does the UK government sell RBS shares at a loss?

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The U.K. Government is not in the business of owning banks. The investment was never supposed to make money - it was to rescue RBS during the financial crisis.

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  • $\begingroup$ It was to be the lender of last resort. The remit was to prevent wider contagion or money sanctions on the individual. A secondary remit was to 'not lose' money: was it that all schemes were structured to be profitable bar the equity injections. $\endgroup$
    – rrg
    Commented Jul 16, 2018 at 23:36
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Holding any asset infers some risk regarding the value of that asset. The market's estimation of the value of that asset includes its expectation of the asset increasing or decreasing in value, and arbitrage pricing enforces the current price based on those expectations.

In other words, waiting for the price to go up would be a gamble. The price could also go down. The current price is probably the current fair value, so deciding your current strategy on the basis of a historic price (500p) is foolish; it is known as the sunk cost fallacy.

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