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Hey all. Sorry for the silly question but what does this actually mean. Is worth selling now or sitting tight? Am new to all this so learning
No Sit tight in my opinion, and take the rights option if you qualify and have the spare cash, and if you have faith in the company and the long game. Everyone’s position is different so there is no right or wrong. I have had my fingers burned with RI’s in the past and personally don’t like them, but that fits my investment goals, so yesterday I sold my holding in NG, took a small loss of £800, but better than selling today and loosing thousands in my case.
Mr-O
Are looking at buying back ?
Next few weeks / months will be interesting
I will be looking in here regularly
Maybe 500p to 700p buy here in September time IMHO
Poor decision by Pettigrew - he should go. The company could have sold the interconnectors or hived off the US business and avoided the capital call. Destroyed around 10% of shareholder value with the rights decision.
I bought these yesterday after lunch after the drop on HL and to my surprise this appeared today:
'Action required before midday on 6th Jun 2024. Take up your option to buy more shares in National Grid. You can buy a maximum of 7 new shares for every 24 shares you held at the end of 23 May 2024, at a fixed price of £6.45 each.'
Which I have done, it's a no brainer.
Taz
Back in 2010 the low came at ex dividend, which this year is 6 June. It hovered around the low for a couple of months and then gradually recovered from the RI in 14 months. It may run a different course this time as we can never be sure what the future transpires. I bought yesterday ex-rights as I held no NG shares. I will double down ex-dividend probably late June. I would encourage folks to buy the rights if they can and leave the shares in the bottom draw.
SUFCESSEX,
Probably will buy back if the SP keeps falling, 20% down since I sold yesterday, and IMHO it will keep on going down over next few trading days (it’s holiday time and no trading) be interesting to see the SP when the markets open next week after the holiday!
What does it all mean......I'll try to explain.
A rights issue raises cash from shareholders to fund either investment in the business or fund a takeover/purchase. In this case it is investment in the business. I can work out much cheaper than a loan.
A rights issue is backed by the banks, and the banks charge hefty fees, the fees are mainly to cover them if the rights issue does not get taken up by the shareholders. This is also why the new shares are sold at a discount, to encourage take up.
If you held the shares yesterday you will now receive nil paid rights, in short new shares that you have not yet paid for(in full), these rights can be sold, or you can take them up by paying for them.
If I recall 7 new shares for every 24 shares you held.
So, you will now own your original shares (now worth less), but can buy 'cheap' shares with those rights.
Today they are ex-rights, hence the drop in price. anyone buying today will not get the rights to buy those cheap shares.
Rights issues have impacts, and benefits.
More shares, less earnings per share, also dividend is spread over more shares, hence it will drop, or they will have to allocate more funds for the dividends. They did not mention doing this, they mentioned rebasing dividends (read that as lower yield).
You will have less of a stake in the business if you do not take up the rights.
If enough do not take up the rights then this can hit the share price, as the banks have to buy those that are not purchased, but the company is guaranteed to get the cash (issue was fully underwritten). They of course later sell them, creating downward pressure on the price.
We will know how this has gone when they report the details, dates in the prospectus.
If all goes well the company has new funds, they can invest it, this should bring growth in income, and the may recover value.
If I recall correctly the last rights issue went well, it was fully taken up and the price soon recovered.
any questions and I'll try to explain further...
Thanks - so based on the full rights issue being taken up, what should the share price be now (see my other comment). I assume that the market has calculated the "correct" price - are they a buy or sell at £9, or hold?
You will have to wait for the result of the rights issue, between now and then they could be volatile.
What you are looking for is a high percentage of take up, and it is likely to be high given the discount.
Which will not leave shares in the hands of the underwriters shares that sooner or later will be dumped on the market (they can't do this for a period of time, normally noted in the prospectus).
Good post IDoMyBest. The only thing I can add is that this is after all the primary purpose of the stock market - the ability of companies to raise cash when they need it to grow their businesses. However, the market does not take kindly to being asked for money - how dare they?
I too participated in the 2010 RI and will do so again. As long as NG does not dilute the existing ROCE figure in the medium/long term, all will be wel IMHO.
Indeed it is, and given a strong share price NG. were right to do it.
It is one of the reasons companies care about the share price, if it drops like a brick and you need cash, a rights issue becomes impossible.
Put it this way, BT needs cash for infrastructure, its share price is weak. A rights issue would create havoc at the current price, hence they are borrowing and paying for it.
I add the word ''Rump'' to add to any confusion here ..lol
And do not forget the nil paids have a value in their own right approx equal to the difference between the ex-rights sp (about £9) and the rights share price (£6.45) multiplied by 7/24. About 70p my quick approximation tells me.
Correct, but they will not get the next dividend of 39p, AFAIK.
I'd be sure to account for that in the 'arbitrage' gap.
Oops, after my reply I spotted your HUGE math error....
those nil paids are trading at circa 225p.
IDOMYBEST too! You are right, I just checked the nil paid and saw 225p. I need another early morning coffee.
Please put me out of my misery and tell me my error.
So it seems to me the equation connecting the values - give or take a few pence and the market view on things is:
ng price - div - rights price = NGPN price
909 - 39 - 645 = 238 which is more or less the NGPN price
"Infor" stated below :
'Action required before midday on 6th Jun 2024. Take up your option to buy more shares in National Grid. You can buy a maximum of 7 new shares for every 24 shares you held at the end of 23 May 2024, at a fixed price of £6.45 each.'
Yet the announcement from NG stated
"Record date for entitlement under the Rights Issue 6.00 p.m. on 20 May 2024"
SO....have HL made a mistake ?
No, they have not, the ex-rights date was always the 24th, as I stated ad infinitum yesterday.
Unless I've got my calcs wrong, based on 900p for the fully paids the SP has declined from 1126p at close of pay on 22nd to an effective 963p now. ie 14.4% drop. Have a nice weekend :(
For what it is worth:- If you buy the nil paid right you will not incur stamp duty on the purchase.
However, in my experience many platforms are reluctant to buy nil paid right for clients.