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@TakingMyTime, I mean the announcement to the public. You don't need 100% approval, I think you only need a 70% approval. IAG could have gathered that 70% from institutional investors before announcing it to the public, therefore protecting the price. The point is that I had never seen any announcement with no price attached, being it RI or private placement.
@Longtermview24, I know what a RI is. But even if retail investors are called to participate in the capital raise, why would anybody buy the stock now if he knows in advance he would have to put some extra cash in 1 month's time?
I mean, what is the reasoning behind the SP falling after a RI announcement? In theory, a RI should not affect shareholders, they will simply buy new shares at a discounted price and their holdings will not depreciate. But the SP falls anyway even if the RI does not hurt shareholders. The reason is that most of these shareholders do not want/cannot afford to buy new shares. For this same reason, I don't see anybody buying this stock now when it's already known they will have to buy new shares in September. The announcement should have been made only after shareholders' approval.
"The remainder of the Proposed Capital Increase is fully underwritten on a standby basis."
"IAG has entered into a standby underwriting agreement for up to €2.75 billion, less the Qatar Airways entitlement that is subject to the irrevocable undertaking, with Goldman Sachs International, Morgan Stanley & Co. International plc and Deutsche Bank Aktiengesellschaft in connection with the Proposed Capital Increase. The standby underwriting agreement is expected to remain in place until the publication of the prospectus, at which point it will be replaced by a full underwriting agreement."
Thoughts?
@Triumph, so they should have not disclosed it today? I'm sorry but I've never seen any company announcing a capital increase without announcing the offering price. The only effect this will have is pulling the stock price down. It is not clear whether retail investors will be able to participate or not, so why would anybody buy it now if they will see both its position and its stock price diluted?
@Triumph, I don't understand why they don't say the offering price already? Are they waiting for the SP to decline further to do the offering even lower? I don't understand. It's obvious that with this RI news the price will go down today... so I really don't get why the offering price is not already disclosed, it makes no sense for me. If the offering price was disclosed the SP would go to the dilution price and not lower. This way, it can go lower and lower and lower. I'm definitely missing some point here.
If on Friday IAG announce they decided to proceed with the rights issue, will they also disclose the offering price? Or will they only disclose the price at the time of the offering, which might only be by the end of the summer?
Thinking now.. I guess they will have to disclose it on Friday as well, otherwise, as the price deteriorates following the announcement, the offering would have to be at a lower and lower price. What do you guys think?
I don't think it will decline tomorrow to be honest. It will be up 1/2%. And it will be sideways for the rest of the week until Friday.
@Paddy, where do you see the after hours market? I'm not Brit, am not familiar with the FTSE mechanics.
I see IAG and all the other airlines start recovering sooner than later. Dr. Fauci said today he's expecting the vaccine in October/November. As soon as the cases in the US start declining, airlines will pop. California, Florida and Texas seem they are close to reaching their peak.
I don't think IAG's SP will decline much further unless a RI actually takes place. The price as of today is a total bargain and I really don't see how I could not get a return in 1 year time if I bought it this week. The question is how low can the price go? Where do you see it with a RI? I think my strategy will be to wait for a RI and then wait another 1/2 weeks to hop in again. So, the 2nd week of August is my best price prediction.
If it's equity then yes, it will dilute shareholders' positions. Actually that would be the true dilution case as you don't have any chance to participate in the capital raise. In the potential rights issue they are talking about now, retail/you may have the chance to participate in the capital raise, and if you chose to do so, you won't be diluted.
I know they don't have any legal obligation to withhold information, but I think IAG should be protected against such breaches. If the contract could be terminated if such breaches come from the banks involved, I guess the number of breaches would decline substantially
If true, why are these "sources" allowed to disclose such news? This is bad for IAG. As the new shares will always be issued at a discount price vs. today's price, the more news about a possible rights issue, the lower the price of the newly issued shares. If IAG had proceeded with a rights issue offer at the time the first news came out, the price of those new shares would have been around 250p. Now, after all these news, and as the SP declines as a consequence of such news, if IAG were to proceed with a rights issue, the price of the new shares will be around what? 170p? Therefore, for the same number of shares, IAG would be able to raise much less capital. Or, they could raise the same amount of capital, but further increasing shareholder dilution, and as a consequence, IAG's stock price. The ultimate goal of any public company is to have its stock price as high as possible, so I just don't understand why these sources are allowed to disclose such sensitive information in the first place. Why doesn't IAG have a contract clause with the banks they are working with saying the contract is terminated if such information is breached?
So, my reasoning here is that the more news is out about a possible rights issue, the less likely a real rights issue is to take place, because at such a low price a rights issue is simply not worth it.
Can anyone please explain me where is the flaw of my argument?