Member Info for Hexam

Chuz - Although you "want some sort of counter argument to the things I perceive as pitfalls or negatives to the investment" I'm afraid I can't help much as I agree with pretty much all you say and to me you are just asking sensible questions and looking for answers like any investor should.

One thing though that may help the sp short term is that ARB have now started putting gross profit figures in their monthly updates. Even though this isn't quite profit before tax (it excludes things like wages) it does include the cost (depreciation) of machines and the impact of changes to BTC in the month.

With the sharp climb in BTC so far in October this 'gross profit' figure is heading for about £25m (compared to £10m in August and zero in September). That might be a wake up call to some potential investors although a few may be put off by the volatility of this figure.

Confirmation of the increase in mining capacity to 1.7 EH should also help as of course will BTC if it goes ballistic.

"If you don't agree with any of the figures then tear the figures and assumption apart, put me in my place, show me a different view so I can change my own view if it's valid."

Personally I can't, in fact quite the opposite. Clearly more funding is extremely likely and another share issue is possible along with some of the other options including selling BTC, the Pluto holding, loans, leasing machines etc. They can reduce the funding required if they can generate other income e.g. from hosting other miners but would think this is limited and would reduce their own capacity to mine.

I'm not too worried though whichever route they choose as the returns should justify the investments. I am more concerned that we have had the same 1075 PH for the last eights months - not great whilst others have been expanding aggressively. And although we have been told some new machines have already been installed and are operational we were told exactly the same thing in May. And we were also told we would have 80PH in July. Yet the reported hashrate has remained stubbornly at 1075 PH.

This may be part of the reason why the sp has stalled and I'll certainly be more confident once we do actually get news of an increase to our hashrate (and no, the quiet period is not preventing that announcement).

So whilst I still believe the plans are solid and the sp will climb much higher than it is today, even if BTC doesn't climb much more, this will only be if we can actually deliver on the expansion and grow our hash rate faster than the difficulty levels increase. This is by no means a given. In the meantime some of the numbers being bandied about on here are at best selective and/or optimistic.

To all those that have filtered BB he has just posted something that, for once, I actually agree with :O

"You're also supposed to be filtering me and ignoring me. All these constant references to me are beginning to make me blush. If you people don't want to know me then STOP REFERRING TO ME!"

Please do as he suggests as it just feeds his ego more or, if he is just acting out a persona, then the character that he is playing. In the meantime you're not missing out much from his posts, just the same old, same old - 360 red flags being frantically waved by three wise brokers that we are all emus for ignoring whilst we hysterically ramp instead of either listening to his sage advice or going off to discuss our views like a herd of sheep in our very own private members' club - or something like that (may have lost a bit in translation).

GLA and please pass the port.

Part 2!

4. If it is true (Hexam) that “the reduction in value of these (existing) shares due to the RI (only) offsets the value of the discount available on the new shares”, and that "if you do choose to invest in buying further shares (or do not).... then in both cases you haven't lost or gained anything", then why bother incurring dealing costs? Is this not equivalent to just throwing more money into the pot just to stay where you are?

Yes, I believe it is throwing more money into the pot just to stay where you are (but with a higher fund) - though you incur NO charges. The no charges is the one clear advantage over simply just investing more.

Assume you held 1000 shares before the RI. At 'current sp' used in previous answers this is worth £2,690.

For 1000 shares you have 476 rights. You can sell these at 476 x 86p = £410.

This means your total investment is currently worth £2,690 + £410 = £3,100

If you decide to sell you will receive £410 and be left with 1000 shares at 269p each = £2,690.

If instead you take up the rights you will purchase 476 shares and invest 476 x 183p = £871

This will give you a total investment of £3,100 + £870 = £3,971
This also equals your new total number of shares at the current sp i.e. 1476 x 269p.

So the difference between this and what you would have if you had instead sold is:

£3,971 - £3,000 - £410 = £1,281 = 476 x 269p

So the maths shows that you are effectively choosing to buy 476 more shares at 269p NOT 476 shares at 183p as even though the latter is your cash outlay you have also foregone £410 in doing this.

The numbers may have helped - or just confused more - so as I suggested before please look at reputable sites such as the one below which probably explain it a lot better than I do and that are better to trust perhaps than a stranger :)

https://www.investopedia.com/investing/understanding-rights-issues/

Thanks Finlay - I'll try to answer your specific questions below but RIs can be very confusing and explanations can be hard to give so rather than try to follow my (or other posters') attempts it maybe be better to grab a cup of coffee (or glass of whisky!) and read through more structured information from sites such as investopedia.

1. Is anybody seriously not thinking of taking up their RI option, and if so, why?

Yes, I am. Why? Because like every other investment choice it is a straightforward one of do I want to invest more in a company or not. As I've said a few times this RI is NOT a chance to buy shares on the cheap. Yes I can buy new shares at 183p but in doing so I would forego the 86p (assuming sp of 269p) I would get if I sold the rights instead. So really I am choosing whether to buy at a 'cost' of 269p i.e. the current sp (at the time you posted) but this will change as the sp changes. Another way of looking at it is that an sp of 269p is equivalent to a pre-rights sp of 310p and since I wasn't thinking of investing more when the price was at that sort of level before why should I now? (The answer is that I am considering it as for me the RI cash gives them more opportunity to take advantage of the recovery and the market has overreacted to the RI and 269p now (or 310p as was) is relatively cheap in my view).

2. Wasn't there an earlier RI (in Jan. 2021?) and at a higher price than what they are currently trading at on the open market? Didn't IAG & EZJ also do the same, and again at a higher price than what they are now achieving?

Not sure what you are getting at here as EZJ and previous TUI RI are actually both bad examples for supporting a take up at rights (I'm not familiar with the IAG example). EZJ for example is trading at 608p which is 30p below the level it should be trading at (638p) if the price had been the equivalent of the 789p it was when the RI was announced. I partook in the EZJ RI and so my loss at the time the RI was announced has now increased somewhat. I'm still holding EZJ though and am still confident of a turnaround as with other travel stocks.

3 Am I right in thinking that new shares acquired under the RI can not be sold until 02/11? And (and this sounds really crazy), might that not be at the same price as on the open4 market? Surely not?

I'm not sure of the exact date (not something that I'm bothered with) but sounds about right but would need to check timetable. If you sell though then yes it will be on the then open market price as they will be no different then to the existing TUI shares you already own. As to whether you make a profit or loss when you sell depends on whether the sp is higher than the the 269p now (or whatever the sp is at the time you decide not to sell).

@beat - Good question but I still think it's sensible what they've done. For example what happens if there is indeed an adverse currency movement before the date the new shares are actually purchased - will Halifax reduce the number of shares or take more from your account (if available)? Maybe they have hedged in some way themselves and perhaps the cost of this is why you have one less share? If they haven't hedged then I can't see how they can guarantee the number of shares you'll get but I haven't been involved in an RI before with a currency risk involved so may be there is some way you can do this that Halifax are doing but Fidelity are not?

Beat - I think it is just that a precaution to make sure the amount of cash available is enough to cover the cost of the rights based on the then exchange rate. Presumably coolhand's situation is similar to mine, with Fidelity, who say:

"If you choose to take up your rights, we will ring fence £1.92 per new share to ensure enough cash is available to cover the payment in Euros, any additional ringfenced cash will be returned to you."

Doing this makes sense to me.

"Cash burn on a fixed costs plus capex basis during the quarter was c.£36 million per week on average, coming in under the guidance of £40 million per week."

Fair enough but this is not the same as saying they are losing £35m per week and this basis is also not a good indicator of full year cash burn - certainly not a good enough basis on which to try to project break-even numbers.

"If is was at 58% capacity and losing £35m a week in q4"

Where does it say they were losing £35m a week in q4?

This from RNS:

"Total group revenue and headline costs for the fourth quarter is expected to be around £1,000 million and around £1,140 million respectively"

And

"easyJet has maintained its disciplined approach to capacity and cash management which resulted in the generation of c.£40 million of operating cash during Q4"

Seems inconsistent with either a loss or cash burn of £35m per week but happy to be corrected - with evidence.

"After exercising RI last January - my average was 230.057p. If I'm holding at that, why wouldn't I add at 183?"

Because you are not adding at 183p. That's my point. Yes you are investing in new shares at 183p but you also have the option of selling the rights at 81p. So the choice between the two options is 264p - the current sp. You are not getting a bargain as you are not buying the full share - only the part of it you don't already own.

"if you don't think it's worth taking them up at approx £1.83 - why where you holding in the first place?"

Same answer really. I'm choosing between taking up at £1.83 or selling at 81p. So a £2.64 swing and the same price I am currently holding at. Is it worth investing more at £2.64? Perhaps and I probably will but only because I think things will improve for TUI with the skies opening up, the pent up demand and the cash raised giving them a sounder footing to take advantage of this. Not because of a discount which is not a discount at all but just clever marketing.

If this doesn't make sense, or you think I'm spouting rubbish, then don't take my word for it - but would suggest you look here or do some other research:

https://www.investopedia.com/investing/understanding-rights-issues/

@Sutty69 - As Moose says you can sell the rights and this will compensate for the fall in share value of the existing shares.

Another option though is to sell enough of the rights to enable you to buy more shares and keep the same level of investment. Depending on who your family are with though this may not be as straightforward as the other options. If interested then can google 'cashless take up of rights issue' or your family could speak to their broker.

If you do nothing then hopefully the rights will be sold for you anyway but wouldn't want to test this!

Some people think RIs are bad because the sp drops so much when the shares go 'ex-rights'. Others think they are good as they are getting new shares offered at a big discount. So on this board, just like every board when there is a rights issue, some posters are bemoaning the big drop in value while others are excited by what they think is a golden opportunity to buy on the cheap.

Both groups can't be right and in fact neither is.

All that is happening is that an amount (the 'value of the rights' which you should now all be able to see on your account) is moving from your existing shares to new shares. This amount can be sold in which cash you get a lump sum to compensate for the loss in value of your remaining shares. But if you do choose to invest more by buying new shares this lump sump is moved across and added to the amount you invest to give new shares which then have the same price as your existing shares (this is why the value of the rights always equals the sp minus 183p - the fixed price of the new shares). But in both cases you haven't lost or gained anything.

I wouldn't presume to suggest whether selling the rights or taking them up is the best thing to do. But if anybody thinking of selling up just because they are alarmed the sp has dropped so much or taking up the rights just because their eyes have lit up at the thought of getting new shares for only 183p - then I would suggest reading up more on RIs to understand the price movements. That way any decision is hopefully made for the right reason i.e. because of the confidence you have (or don't have) in TUI and not because of the illusions created by the drop in share price or the apparent 'discount'. GLA.

They are confusing and sorry my explanations were up to scratch :( Suggest perhaps you take a look at one of the links posted today as they may help a lot more. May also be worth looking up cashless take up of rights as you wouldn’t need to invest more but instead can sell some of the rights to take up the rest.

In other words Graham the value of your investments haven’t gone down as much as it looks.

You had 500 shares at 328p = £1640

You now have 500 shares at 271p = £1355

Plus 238 rights at about 88p = £210

You may not be able to see the second part yet though (I can’t on my account). It is this bit that equals the value of the discount and which you could decide to sell.

Your total value is therefore about £1565 so much closer to your original value and only less because of today’s fall.

Yes, but the reason why it dropped so much is because of the rights issue. If you add the value of your shares at 2.71 plus the value of your rights (if you can see this yet on your account) you will get broadly the value you had before.

Yes - sort of.

My broker has also quoted 192p but this includes a safety margin as the price of the new shares is actually fixed at 2.15 Euros - so they are guarding against adverse exchange rate movements.

So if you take up the rights the price per new share will probably end up being more like 180-185p.

Also, although this is a reduced price your existing shares are no longer anywhere near 3.28. The reduction in value of these shares due to the RI offsets the value of the discount available on the new shares.

@Peders1 - You can do both and each has the same (initial) value so one option is not automatically better than the other and I'm afraid you don't make an instant profit (or loss) - that will come later depending on what happens to the sp in the future.

Easiest way to think about it perhaps is that your old shares have been split into two parts but with roughly the same total value as before. The first part is your existing shares which now have a much lower price so this has reduced the value of your investment, but this is offset by the other part which is your right to buy more shares at a discounted price - which you can either take up (provided you have sufficient funds available) or sell. You can even do a bit of both.

That's the short version. There have been plenty of posts on the this site going into more detail, including worked examples, though if you are unsure of anything it is probably best just to google it. Hopefully the choices from your broker are clear but would suggest you do make a choice as you may lose the value of the rights if you do nothing. GL.

Beat - the rights will always trade at 183p less than the sp. So if the know the sp you know what the rights will be trading at.

Speel - he can give updates on machines - and has (both in his video and in an RNS). Other than a bit more positive spin in some of the announcements I’m really not sure what flood of good news some think is being held back because of the ‘quiet period’.

Not a fan of feeding trolls normally but would just point out that:

a) I don’t think they’ve ever done a rights issue so perhaps repost this query after they’ve done the first one??

b) Mining at a loss? Their electricity costs were well under £1m last month and their mining revenue was £5.5m - and is likely to be much higher in October with BTC on the rise. Somehow think electricity prices won’t have increased THAT much???