London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
What i can't understand is why do they want to pay the German gov back the loan like this, was the German gov putting pressure on them to pay it back, surely they could have paid it off as the company got back to normal, just seems strange to me, no matter what, the market doesn't seem to like the move.
The company has done something and as a result the sp has dropped significantly - that is not in dispute. So expressing frustration at this I think is only natural and I wouldn't describe it as 'whingeing'. I'm just surprised at the extent of the drop given what they have done and hope that after the initial reaction this will in time be viewed a bit more positively.
It dropped 13% on the day following the RNS and after yesterday and today 20% down on the week. Markets are up today and yet TUI is still falling. If they had held this back for a few weeks after the final results were announced we may have seen some pretty good numbers to talk about. Call that whinging if you like but my investment went from being nearly even to now several grand down again.
Yes it is a dilution - I never said it wasn't. I also agree it is worse than an RI but not 'far' worse as the number of new shares is relatively small and so the discount. As I said the 'theory' is the that the sp should have not changed much (only around 1% or so in fact) but the text book is one thing and reality is another. Sentiment is clearly against this move (for now).
Hexam is incorrect. This is dilution by any definition. Far worse than a rights issue as we have not received anything in return. Admittedly we may recover once large chunk of debt has been paid off.
13.:20 - early stages of a good day finish. If SP continues nudging up recovery will be soon.
Morning all,
I completely agree with that Hexam. The drop here over the last 2 sessions is predominately sentiment led (at least below the £2.20 SP mark.
TUI has recovered cautiously well since the Covid slump of 2020-2021 and had settled into a stable mid-bound range of £2.10 to 2.40 and was trading towards the upper end of this at close of play on Tuesday. The share capital has been increased by around 10% but importantly for me, the new shares have been pre-sold to institutional investors at 2.62 euros each (or £2.20 GBP).
Those institutional investors would not have agreed to that negotiated book price if they did not see a healthy 20-30% minimum return. There is also a 3 month lock-in on these so we will not see any dumping until late summer at the earliest.
Currently we are trading around 8% below the institutional acquisition price for the new shares. This portion of the SP slump is entirely sentiment led and is, in my mind, being seized upon in conjunction with inflatory pressure worries to drive it down and let those in the shadows in at a premium discount.
TUI has made a positive bold move to stand on its own here and repay govt support debt, reducing interest payments in an inflatory environment and setting a confidence benchmark with a substantial institutional purchase.
"The value of the company cannot have changed, if your worth £5b and owe someone £500m, then you decide to pay them £500m your value hasn’t changed, or am I missing something else"
You are correct. Sort of. Assuming the money is coming from cash reserves the sp will only change depending on whether the market thinks it is a good, bad or just ok use of that money.
Here the money hasn't come from cash reserves but from raising capital from new shares. It's similar though. The mcap SHOULD go up by the exactly the amount of the new money but whether or not it does depends on what the market thinks of the move - good, bad or OK. The sp SHOULD then stay the same as although the mcap should go up the number of shares have gone up too - actually the sp should be expected to drop a little bit as the new shares were offered at a modest discount.
In short the sp shouldn't have changed much but it is sentiment that drives sp and clearly the market has (for now) judged this a 'bad' move. Personally I think it is an overreaction.
I think the analysts are evaluating this but in my view, it is a really good bargain buy at the moment if you have more than 3 months of horizon. The management is very astute as they are forecasting increase in the interest rates and it is better to service the debt by release of equity. We will have to weather this short term volatility but in a longer run, given the TUI service record and offerings, I believe somewhere 25 % appreciation from current level.
Maybe there is some reputational damage? Maybe even the institutions don’t like it?
No expert. Just IMO
Surely the debt was accounted for in the share price, by paying it off it now means that TUI have less interest to pay. The value of the company cannot have changed, if your worth £5b and owe someone £500m, then you decide to pay them £500m your value hasn’t changed, or am I missing something else, please advise?