Member Info for Hexam

"This will still leave myself and yourself out of pocket, but not by as much compared to if we sell our rights"

Simply not true - Taking up or selling the rights has the same value. The difference is simply that you have invested more if you take up the rights.

"Is there any benefit then in buying the right? why not just buy the full price share in the market?"

Not really. You can currently sell your rights for about £1.50 each and then buy the share for £6.50 on the market so net outlay £5 per share or simply take up the rights at around £5 per share. So no difference. However the first approach will incur more charges and it will affect tax differently as you are selling rights now. The other difference is that you are at risk of price movements between when you sell and buyback. With the second approach you are at risk of price movements up to the date the new shares are issued as you are locking into a fixed price.

Whether you take up the rights or sell them should really be driven by simply whether you want more exposure to TUI or less (or to keep it the same by tail swallowing).

…and the £1.50 is the value of the rights to buy one share at the discount - not eight. That’s why it is equal to the current amount of the discount.

The £1.50 is about right - it should be roughly the sp less the price to take up the rights so £6.56 (currently) less about £5.

£4.01? Really don’t don’t get that as the price is fixed at 5.55 euros and it is only the FX rate and charges that should affect it. Bizarre.

I think you’ve just confused it even more! Especially using £18 (or £1.80) which hasn’t been seen in a while.

In your example you DO effectively have 364 shares at the current share price - it is the cost that your calculation applies to and why there is a loss (since you originally bought at £18).

I think the point you may be trying to make (and correctly) is that you can’t look at the new shares and the £4.88 in isolation but have to look at the other side too (the fall in the value of your existing shares due to the RI - not from £18. They offset each other so that exercising or selling your rights in itself does not create a profit or loss.

Hi PG - yes, far too many numbers today and it's all very confusing BUT it does boil down to this:

If you take up rights your investment goes up by the amount you invest
If you sell the rights your investment goes down by the amount you sell

There is no magic way of increasing your investment or nefarious goings on where you immediately lose out (apart from the charges)! Any gains or losses will as always be due to the movement in sp after you make your decision. This means if you are taking up rights you are simply betting on the sp going up and if you are selling the rights you are not so confident (or simply don't want to increase your exposure to TUI or don't have the spare cash anyway).

Tail-swallowing means you're hedging your bets and keeping your investment as is.

Anyway - enough from me, been staring at the screen and playing with numbers far too long today :-)

"It doesn't add up on current price of TUI. If you can buy Ri (most retail brokers don't allow you to buy) for £1.54 and get shares for £4.01 total cost is only £5.55."

Where can you buy shares for £4.01?

PG/HeadingNorth - I don't understand what you are suggesting as whether you buy new shares from tail swallowing or from selling existing shares should make difference. The price of the new shares is the same in each case (about £5) and what you can sell the rights at appears consistent to me with the sp i.e. is moving in line with it?

donalb - I still think rights issue price is applying to the (smaller) number of original shares but this should be easy to check if you say the numbers match your account. What is the actual value of your total rights compared to the value of your original shares?

There is just no way the rights prices is over 4 euros - everybody should sell at that price as it's free money.

You are correct Forest but that just reflects that the sp has fallen over the last couple of days (7% today and something similar yesterday?) so in hindsight we would have all been better off doing what you suggested. But that's just the case with all shares that you hold when the price drops. It's nothing to with the terms of the RI just the sentiment on the stock (which obviously the RI may have contributed to).

Hi donalb,

I don't know what is happening with the 4 to 5 Euro price you are quoting. The only thing I can think of is that the price is per original share not per right/new share? This would explain the difference very well.

All I know is that the £1.54 in Mikeln's example matched up with what I think it should be given the sp (unless I've messed up the calculations which is always possible)! It should be the case that the rights price can be derived accurately from the sp but sometimes it doesn't quite work out (including for a time in the last TUI RI)! However the difference between 4+ euros and £1.50 is too large so I suspect they mean different things.

IMPORTANT:

Hi all. The RNS suggested we had until April 17 to do something BUT it is clear from my broker that I have until 12th April. I suspect different brokers will have different deadlines so please make sure you check your own account to see when you need to act by and don't rely on any dates given here!

Hi Robert,

Yes, the 1200 shares means entitlement to 3200 new shares as in your numbers. I still don't understand the other numbers though as 3200 new shares (if you take up them all up) should cost you about £16,000 which doesn't match your numbers.

Your situation should follow the one I have just done for Mikeln just with a different starting point. As I say though, the basic rule should be the same for everybody that the value of your current investment should be the sum of your rights options plus your existing shares and this simply increases by the amount of new money you invest. Conversely if you sell rights the value remaining reduces by what you take out (you're just holding it as cash instead).

@Mikeln

You have 131 shares at £6.63 = £868
Plus you have 349 rights at £1.54 = £537

So your total investment is currently worth £1,405

If you buy all 349 rights it will cost you (as you say) 349 x £5.1 = £1,780

You will then have 480 shares in total.

These will be worth 480 x £6.63 = £3,182 (assuming the sp stays at £6.63 when you actually get the new shares).

This is also roughly 1405 + 1780 i.e. the value of your investment has simply gone up by the new amount you invest.

If instead you choose to sell your rights you would be left with £537 cash and £868 of shares total = £1,405 so simply the value of your current investment but with some now as cash.

There seems to lots of numbers flying around but the above should hold true for everybody i.e.

The total value of your investment is currently the value of your existing shares plus the the value of your options.

If you sell the options you will just be left with the value of your existing shares (and the rest as cash in your pocket).

If you take up your options the value of your investment will simply go up by the amount of new money you invest.

You can choose to do a bit of both including tail swallowing whereby you sell enough rights to buy the shares that will keep the value of your investment the same (in this example £1,405).

Note: numbers don't all tie-up exactly because of rounding/charges and all the above assumes sp doesn't change (which of course it will). I'm also still not sure if there is upside from the sanctioned shares in all this...

Greylady - I honestly don't know (shrug emoji)

It depends a lot on what I can sell the rights for and what impact the treatment of the 31% of shares that are sanctioned (and can't take up their rights) is having. As I don't have my rights yet I don't know what I can sell them for (and the comments by posters on here seem to give different answers) and I don't yet understand the sanctions impact fully.

Normally it can be beneficial to sell the rights and use the cash to buy new shares later as usually the sp drops after the new shares are issued as lots of people seem to sell their new shares in the mistaken belief they are making a quick profit because of the 'discount'. So I was going to try that with at least some of my rights but it depends on whether the price I can sell them at now is consistent with the sp - which I don't know yet. Plus the sp has dropped quite a bit from the theoretical ex-rights price (£7.30 odd) so wouldn't be a great time to sell them anyway.

So waiting on more info and hopefully some upswing in the sp soon.

@scmdcyp

Just to add that you may already have those options. I still can't see anything on mine but from the last one the rights appeared on the normal page with the rest of my investments and I could sell the rights there but to take up the rights I had to go to a different page (under Corporate Actions) to do that. Maybe your broker does something similar in which case it should be highlighted somewhere that you have corporate actions outstanding and have to go there to see what you have to do?

@scmdcyp

It sounds like those 1226 are not shares but just the rights to buy more shares and perhaps you just have a little longer to wait before that option shows up? You can either then sell those rights, use them to buy 1226 new shares at the discounted price or a bit of both.

Hi Robert,

Must admit I'm a bit confused by your numbers as you said before that you had 1100 shares and this should mean you are able to buy 8/3*1100 = 2933 new shares so I'm having trouble understanding the numbers that you've posted. Unfortunately I still haven't got my rights through yet so can't compare. Do you have 1100 shares at the moment? It may be that the sanctioned shares are messing up the numbers but without seeing my own I can't tell.

I would never though give an opinion on what you should do anyway as that should be your choice but I would suggest that you at least do something. If you do nothing then I think the broker will sell the rights for you anyway but I'm not sure this is not guaranteed and there is a chance you could lose out completely.

I'm also sorry that I missed an earlier question you asked about just buying £5,000 but yes, you should be able to do this and sell the rest of your rights (again don't just leave them). You should also have an option to do a cashless transaction whereby you sell enough rights to purchase enough shares so that your overall £ holding is unchanged (called tail swallowing). In this case it costs you nothing but you don't lose the value of your rights.

If you can confirm how many shares you do have already, and the rest of the numbers, I'll hopefully be able to explain the options better but as I say I won't presume to tell you which one is the best (nobody can know and it ought to be your choice based on your own views and outlook on TUI, your own circumstances and your particular level of risk tolerance).

"Whats the calculation for the actual value of the shares trading today at £6.68 versus the shares when all this is sorted out?"

£6.68 IS the the actual value (at that time) of the shares when all this is worked out - there is no calculation for the shares trading today - they are ex-rights so the calculation's already happened. What moves the sp from now on is purely market sentiment. That often continues to be poor for at least a while where RIs are concerned and it is not unusual for the price to move down much closer towards the rights price but all that is driven by sentiment. The price could also go up short-term from here, no-one can be sure - and if there is other significant news then the sp will of course respond to that too.

In time though the sp will simply reflect the performance of TUI and the sentiment that goes with it.