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@Willie: Don’t be so sure, they said that about IAG and the markets are not dissimilar.
Toff,
Your dummies guide may be a little to advance for me haha.
I think your missing my point, I suppose it is calculated risk depending on if you think there will be a v shaped recovery in the the share price after the RI or if you think the existing share price will drift towards or below the RI figure for a period of time
Agree with johnpwh. I think it's unlikely folks will be able to pick up shares close to the RI price. Perhaps at a 10-15% premium if your lucky, but bear in mind the market has priced in the worst for RR, a lot of folks have held off buying till the financing plan is known, plus there's a lot of shorts which will need to be closed at some point. That could well be enough for a blue finish if they come up with a robust financing package.
Cheers Toff.
Entertaining posts, keep it up.
There is no nailed on gravitational pull between the current share price down to the RI price. I agree it tends to happen to an extent due to sentiment but if a company with fairly valued shares at say 130p (similarities to the current RR share price is purely coincidental!) has a 2 for 3 rights issue @100p then (at least in theory) the value of ALL shares when the 'new' shares are admitted to the market is (3 x 130 + 2 x 100)/ (3 + 2) = 108. Clearly the SP is a market so may be higher or lower than 108 on the date when the 'new' shares are admitted to the market. Between announcement and being admitted to the market the 'new' shares are traded nil paid, so that if someone qualifies for the RI but doesnt want to take up the new shares by paying the 100 p for them can sell their rights. It gets a bit complicated (and the acquisition costs for CGT is even worse!
John
“It would have been annoying so I wondered how the eligibility date was normally worked”
If the RI is announced tomorrow you’ll be eligible.
Jjb
Here’s a real simple explanation about how rights issues work. It’s my own but it could have come out of the investing for dummies manual.
You own 5 percent of a company.
They have a RI
One new share issued for each one in existence
If you don’t take up the RI your share of the company will fall to 2.5 percent
To retain your 5 percent share you need to buy the new shares.
If you forfeit your right to buy the new shares you’ll be compensated by the underwriters by way of a small cash payment.
They will then sell those shares on. Unless you think the company is going bust or you don’t have the money to buy the new shares it is always advisable to take up the RI
Toff
Thank you both replies. I understand the concept of a RI but was just wondering if I would be eligible or not as only bought a few hours ago. Eg maybe a chance only eligible for holders as at 29th sept, not today... It would have been annoying so I wondered how the eligibility date was normally worked in these. Didn’t want to miss the boat by a few hours lol.
Best way to keep average as low as possible As far as I see it is to take up the RI (if eligible!) IMO.
Should find out more tomorrow then.
GL
Johnpwh,
Maybe a stupid question but cant understand the positives of an investor taking up a rights issue if undoubtedly the existing share price drifts towards, possibly below the rights issue figure?
JOHN. As Steel says you will be eligible if there is a Rights Issue if you buy before it is announced. There are some other forms of equity issues, eg placings, where new shares are allocated to wealthy individuals/ institutions and no existing shareholders have any rights in respect of their existing shareholdings. It does seem like this will be a Rights Issue. Don't be surprised if the RI price is a large discount to the existing SP - it is not necessarily a comment on what the BOD think is a fair price for the existing shares. Hard to explain in a short post but all RIs are offered as a discount to recent SPs, and it all comes out in the maths because of the rights you have to participate in the RI . I would recommend that anyone committing part of their savings to individual shares (as opposed to funds) get themselves a basic investment book that covers fairly basic concepts like RIs, there are many basic questions asked on these boards
They’ll announce the date where shareholders will be eligible. Don’t worry.
Also, the share price tends to drift to the RI price anyway. So you can get the shares cheaper regardless.
I only bought today, if RI announced in morning do you think I’ll be eligible for the rights or could I have missed it by a day??
Desperation mainly.
Since word got out about it the SP has tanked everyday. If they’d left it for just one more day it would have been unviable.
Float is 1.91 billion shares
At £1.05 each they can still raise £2 billion at a modest discount. If they do announce it tomorrow they’ll have made it happen by the skin of their teeth.
And if they don’t the shareprice will plummet another 20 pence.
Good news for the company. Good news for non-shareholders.
But a catastrophe for the ones who are going to have to stump up £2 bill to retain their slice of the pie.
Toff