UPDATE 1-RAB shares plunge on N.Rock nationalisation

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LONDON, Feb 18 (Reuters) - Shares in hedge fund RAB Capital (RAB.L), one of Northern Rock's NRK.L biggest shareholders, plunged almost 10 percent in early Monday trading, following Britain's decision to nationalise the ailing mortgage bank.

An independent audit is set to calculate how much the government will pay shareholders to take the lender into public ownership, but many investors fear they will get nothing.

RAB has a stake of about 8.2 percent in Northern Rock, making it the largest investor in the bank after SRM, another hedge fund that has built a sizeable stake since Northern Rock's near-collapse in September.

At 0908 GMT, RAB shares were down 6.1 percent at 65p, valuing the hedge fund at around 334 million pounds.

Northern Rock shares, held in RAB's special situations fund, account for 2 percent of its total funds under management.

"The Northern Rock development is not good news for RAB. It has a holding it can't sell ... all the money has just been dumped," one trader said. "The shares had already been coming down from 120 pence. Maybe its strategy is not quite right for the market at the moment."

Northern Rock shares closed at 90p on Friday and were suspended before the opening on Monday. On Sept. 20, when RAB's stake was first made public, the shares closed at 185.5p.

SRM founder Jon Wood has told British newspapers his fund could consider legal action to secure value for shareheolders.

For more on Northern Rock, click on [ID:nL1793845] (Reporting by John Bowker, Clara Ferreira-Marques and Steve Slater; Editing by Quentin Bryar)