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Yes @shamI89. I also find it odd that with other rights issues I've seen people bang on about taking up the rights because they don't want to be diluted, only to sell then at a 'profit' as soon as they trade fully paid. Er, sorry guys, you've just been diluted in the same way as you would have been if hadn't taken up the rights!
Some people have already got nil paid rights and have flipped them for a profit.However I agree that it would create an overhand and share price would be volatile.
@IsleworthSpy
Sorry, I find it hard to reply because I have difficulty comprehending your numbers and why you even mention TERP. Judging by your number of posts I assume you're an experienced investor and have an understanding of rights issues, so there must be some confusion going on somewhere.
As I see it, the RR. shares went ex-rights on Wednesday. That’s when the 6.4bn new shares were admitted to the market and commenced trading on a nil paid basis. On 12th Nov there won’t be any further shares admitted, it’s just the rights will commence trading as fully paid RR. I don’t see there’s a reason for a significant price move on 12th. The price may be a dip in the morning as the rump gets placed. They may also be held down for a couple of days as some PIs who took up the rights are tempted to bank their ‘profit’.
Which brings me on to the point I was trying to make.
I’m sorry if my previous comments were interpreted as advising people to rush out and sell their nil paid rights shares. That wasn’t my intention. Obviously I don’t know any better than anyone else where the price will be after 12th. The point I was trying to make was for those inexperienced with rights issues, who have the idea that by taking up their rights at 32p they’ll be able to bank a quick profit by selling the shares on 12th. Whilst you probably will be able to sell them for more than 32p you shouldn’t ignore the fact that you might do better by selling the rights nil paid. Specially, what is the point of taking up the rights at 32p with a sell price target from 12th of 70p to bank 38p 'profit', when you could simply sell the nil paid rights at 39p? If you plan on taking up the rights in order to make a quick turn you need to be confident that RR. will be trading higher when you come to sell than they are now.
@ Poleaxe.
Why would you sell your nil paid rights for 39p when TERP is 54p?
Taking up your rights would yield another 7p per share from nil paid.
Assuming of course, that when all shares are released for trading (12th??), the price does not fall below 54p.
I think that the price will be around 60p. Using another company who had a rights issue as a guide.
So an even bigger upside.
Just my perspective, but happy to corrected.
Or have i got this completely wrong?
Many thanks poleax much appreciated.
You've got it Keepcalmncarryon. If you're planning to take up your rights and your target is to sell your fully paid shares at 71p, you might as well simply sell the nil paid shares at 39p and spare the complication and market risk of being locked in for several days (I doubt all brokers will have them setup to sell at open on 12th).
If you take up the rights you are investing in the company and increasing your exposure to its fortunes and misfortunes. You don't profit from the rights process as such. You only profit if the share price subsequently rises, and you will lose more if it falls.
Personally I think they're a risky punt that could halve or double in price in the coming weeks, perhaps both. I doubt even the management can predict the future with a high degree of certainty, let alone punters posting on bulletin boards.
My average price is 83.1. Have been buying when the price was 215. Definitely in for a long haul.
What a complex set up, thanks for inputting selecta6 feels like we have had our pants pulled down. Having not experienced a rights issue before I feel I should of sold prior too. At this point over 20% down and could be allot more if it continues south of 70. Must be lots of us out there taking a clobbering right now.
Pardon me for butting in.
Yes, that's correct.
However......
It all depends what happens to RR share price.
If they increase by 10% then rights value will, and reverse true.
The point of taking the rights is 2-fold, you believe the future is positive and RR shares will rise, and also you maintain your % of the shares in issue, else your holding will be diluted.
Probably not out as clear as Poleaxe, but hope you get the gist.
So poleaxe one final question I currently have 4200 @ 0.39p = £1600, if I sell next week I get the £1600 straight forward enough, if I take up my rights do I pay an additional 0.32 on top of the current price 0.39 with the price of my shares now at 4200 x 0.71 = £2940, albeit I would of added the additional £1344 out of my own pocket. So in theory absolutely no gain. What is the point therefore of anyone taking the rights issue??
That's interesting @fahmad.
By the looks of it HL don't act on your instruction until their deadline. So you still had the RRN shares booked on your account and were able to sell them at 68p. Well done for getting that price. Well done to HL too for having it booked the nil pais shares to your account and available to trade on Wednesday. Some brokers can be a bit slack.
It's good to know it's that easy. On the HL web site they say:-
"Can I change my mind after sending you my election?
If you wish to alter an instruction you have sent us please contact us on 0117 980 9912 and we will do our best to accommodate you. If your election has already been acted upon, and forwarded to the company's registrar, this may not be possible."
@Poleaxe, the instruction was automatically revoked when I sold my rights. I had option to sell until 9th November. My instruction wouldn't have taken effect before that anyway.
HL made it very easy. I accepted to take rights but moment after price shot up to 100 and I sold rights @0.68p. So what has happened here that I have taken the rights also in theory as I have paid 0.32p (100 - 0.68p = 0.32p). It was simple as a click.
@fahmad (and anyone else), if you've instructed your broker to exercise the rights I think they'll probably be able to let you revoke this, provided you tell them in time. I doubt it would make you popular though!
Thanks @fahmad. I wasn't aware that brokers would let you do that. Aren't you effectively selling RR. short and then covering when your rights are fully paid? I know you can do that with CFDs. I didn't know the likes of HL would do that with shares accounts. If they do, I've learnt something.
I keep on banging on about this but the cost to you of exercising the rights isn't just 32p. It's 32p plus what you could have got had you sold the nil paid rights shares.
Given that the RRN nil paid rights shares track at about 32p below RR. shares the logical conclusion is that taking up the rights costs you the same as simply buying more RR. shares in the market, like anyone else.
The value in the RRN shares you now own has come at a price. You've paid for them in the loss you suffered in the value of your original RR. shares when they went ex-rights on Wednesday.
If you want to invest in s company, rather than buy shares for the rights it's often cheaper to bide your time and wait for the rights issue to clear.
@Poleaxe, Keepcalmncarryon should be able to sell his rights even after instructing to take up the rights. 0.32p will be deducted from the current share price.
Thanks poleax so far I haven't taken the rights I'm waiting to see how this plays out.
Keepcalmncarryon, sorry but you've fallen for the financial conjuring trick. It's classic misdirection of showing you the rights discount in one hand whilst taking away from the other. All the matters is your overall investment.
There's no sudden cliff edge at 32p. The more the price falls, the more you are down.
At the moment you could sell the rights for 35p. Yet you are contemplating exercising them at 32p in order to sell at 64p and make "100% profit". Can't you see the madness in that?
Plus if you instruct your broker to take up the rights you're locked in and won't be able to sell until after 12th. In the meantime you could suffer the agony on seeing the price go down and not being able to sell.
poleaxe; yes, and then whoever holds the shares, ie, the underwriters, will hold a huge amount of RR at 32p - so will be waiting to pounce to sell millions of shares whenever the SP gets to, say 35p or 40p, holding the SP down for years, a la Lloyds.
10 for 3 at 32p part of the rights issue, so for example if you by £4000 @ 32 and the price is 64p then 4K + 100%. The lower the price drifts towards 32 the less uptick. You also have to value in your current losses on any none rights issue shares. I was allocated 66% so 34% has lost circa 75% so far.
mline, which is why the company has paid £55m to have the rights issue underwritten. It won't matter to the company what the share price is. They'll receive the £2bn regardless.
The underwritters are the main reason why the rights are priced as low as they are. If the rights had been pitched higher they'd have had to pay more for underwriting, or perhaps not got it at all.
If the rights bomb and no-one takes them up (that won't happen - they'll always be some suckers) the underwriters will fork out £2bn and get a 77% stake in the company.
poleaxe, the new shares are being issued at the set price of 32p. If the SP drops below that level no one will pay for the new shares which would then be more expensive than the Ord shares. The RI would fail, RR wouldn't get their cash and they would be right in the sh*t.
Keepcalmncarryon, can you explain the logic of why it's not an issue as long as it stays north of 32p? I'm assuming you're not an underwriter. I can understand why it might bother them.
This could see more downside as people looking to cash out early, myself as with most seeing my original stake nosedive wiping 000s off. However if this stays north of 32p then not much of an issue. Needs to bounce back today.