Member Info for Hexam

“So as an institution who bought shares at IPO and are now locked in”

Institutions are not locked in. Only 10m shares are and they are held by directors and other company ‘insiders’.

Thanks Mary - regardless of whether 280p or 293p is the strictly ‘correct’ TERP (still not sure) I just prefer to use the 280p as the benchmark for the current sp as it is the one consistent with the last sp before the RI became known i.e. any price changes after that date - including up to the 7th, can be heavily influenced by the reaction to news of the RI itself. Unusually in TUI’s case the sp went up in those two days - for easyJet it plummeted.

So for me 280p is the best figure to compare to in order to judge if the sp has really gone up or down but can understand why others may prefer 293p. The key thing Is not to think that it has crashed from the actual pre-rights sp of well over £3 as this ignores the value of the rights obtained.

Hi Mary - Isn’t the TERP around 280p i.e. based on the sp when the subscription price was actually set after close on the 5th (327p), rather than the 7th. This then also ties in with the calculation from the RNS text below:

“The Subscription Price of €2.15 per New Share represents a discount to TERP (theoretical ex-rights price) of 35.1%”

So TERP is 2.15 / .649 = 3.31 euros then converted to £s gives 280p.

Either number is useful depending on what you are using it for but think the correct TERP is 280p?

Hi iParsnip,

You are correct that if you had £12k before the rights issue it will cost about £3k to take up the rights as dividing your investment by four is a pretty good rule of thumb for the TUI rights issue. In terms of terminology though the £2.93 is actually the current 'ex-rights' price.

If you then sell £3k after the RI then yes you will be back to £12k but as you say with more shares as each will be at an ex-rights price rather than the higher pre-rights price. There is no profit or loss from doing this (apart from how the sp moves in the meantime) but if your aim is to just end up with the same investment you currently have then doing a cashless take up of rights may be a better option as this should involve lower (or no?) charges. This is where you sell enough rights to buy new shares with what is left to leave your investment unchanged. This may actually be a tick-box option your broker gives you but otherwise may be worth googling it and/or contacting your broker.

Hi Sellhigh - I think the first thing is to bear in mind is that the share price hasn't actually gone down since you sold - it has risen slightly since the 8th. This is one of the confusing things about Rights Issues. Various posts below explain this but basically the share price you are seeing now is only the share price for part of the shares. The other part (that you can't see) is the value of the rights that shareholders have to purchase further shares at a discounted price. As you sold on the 8th you cannot compare the price you sold at directly with the price now as you would not be getting those rights.

The price now of 293p is equivalent to pre-RI price of about 345p so if you sold at any price lower than this you would currently be buying back at a higher price now. That's not to say it's a bad idea - that depends on what you feel the prospects are for TUI moving forward but it is important to realise that you would really be reinvesting at what was 345p and not 293p.

If you read through some of the earlier posts, about how prices move during a RI, this may help - but equally it may confuse more, so it is probably better to do a little research on RI from any sites you ma trust - the link provided by @1DayRodney may be a good place to start.

Hi Nath - I didn't make a mistake - not this time anyway :)

When you say:

"Whether you sell the rights or take them up, what you have in your pot is £850 worth of shares" this is not really the case.

The total pot is worth £850 only if you HAVEN'T taken the rights (as you have received the £150 separately as cash by selling them). If you take up the rights you haven't taken any cash out so your starting point remains £1000 - which is split into two parts: the £850 value of shares you originally held PLUS the £150 value of rights that you have not sold. This £150 though is still value in the form of shares - just shown separately for now. It is also why it appears like you are getting a discount. The new shares you buy means you are investing only £264 more but really you are investing £414 more than if you had sold the rights.

Maybe an easier way of considering it is that when the offer period closes all the shares will have the same price. That's straightforward for the £850 as the price is unchanged. The new shares you purchase with £264 at £1.83 each will have a value of £414 in this example. They haven't just leapt up in value though - they have just joined with the £150 you already had and that you could see separately and this then makes the price of these shares the same as the others.

It's almost like a conjuring trick, moving bits about, but the bottom line is what you add (invest) or takeaway (sell) is what the value of the investment changes by.

Hi Cliff,

The £150 was just from a rough, simplified example based on £1000 worth of shares being held BEFORE the RI and the sp at the time.

The actual formula for TUI that applies now that the share has gone 'ex-rights' is:

Value of Rights = Number of Shares x 10/21 x (current sp - 1.83)

Where Number of Shares = number of shares you currently hold
10/21 = represents that you get rights to purchase 10 new shares for every 21 you currently hold
Current sp is the simply the price now so at time of writing is £2.933
£1.83 is the fixed price of each new share you can buy (note actual price set is 2.15 euros)

So if you currently hold 1000 shares (worth 1000 x 2.933 = £2933) then the value of the rights you could sell should currently be around:

1000 x 10/21 x (2.933 - 1.83) = £525.

So at the moment this is about 18% of the current value (£2933) of the shares - roughly the same as in my simple example (150/850).

The figures are approximate (e.g. due to exchange rates etc.) and the amount will change as the sp changes. So if the sp goes up (down) the value of the rights go up (down).

When the rights show up on your account you should be able to see the exact value that you can sell them for anyway.

Probably worth reading up on RI rather than rely just on forums like this - as posters like me can easily make mistakes! There is plenty of info out there including the useful link @1DayRodney posted below. Hope this helps and good luck!

Hi Nath - As Beat says you are gaining more simply because you have invested more. Looking at your answers you are saying if you sell the rights then you pocket £150 but your remaining £850 grows to £1060 an increase of £210. If you take the rights you invest £264 more and your new total of £1264 grows to £1564 an increase of £300.

So yes, you get a bigger increase if you invest more but the key thing is that in both cases the increase is around 24% - about the same (should be exactly the same so I presume there are some roundings in the numbers).

So you have proved what we have been trying to get across i.e. the choice you make now is neutral and which one you make depends on your confidence in TUI (and whether you have the spare funds to invest). If you take the rights issue then if the future SP goes up 20% then your bigger fund goes up 20% so you make more money - but the same percentage. Conversely though if the SP goes down you lose more money (but again the same percentage).

The one thing you state that is a bit misleading though is that "£504 of this [increase] is just from the new shares purchased at the lower price". This is not the case. In your example £264 was in invested in new shares. This grows in your example to £327 and your original investment of £1000 grows to £1237. Both parts grow 24% - the original investment and your new investment.

@HarChris - yes, two things:

- Difficulty level. This increases then margin decreases
- Hosting/Electricity Costs. These are the only costs within the mining margin (the cost of the machines isn't). As the company expands this would be expected to go up in line with the increased EH so no improvement. However the WAY they are expanding should help (cheaper electricity, definitely less hosting) so might gain a percent or two?

On the other hand rising BTC improves margin and they are doing other things to increase efficiency which will help margin too.

Hard to say overall what the net impact will be.

What TUI death spiral? Since their RI announcement the TUI sp has actually gone up (only decreased today because the value of the actual rights is now separate). RIs are not usually welcomed with open arms but they are often not as scary as the de-ramping crowd would have us believe. Even easyJet is currently sitting at around its equivalent pre-RI price.

Agreed - it's amazing how often you can check something repeatedly and only spot it's wrong as soon as you've posted it!

Nath89 - Just seen your last question. You are correct except that the rights issue is fully underwritten. So yes, if everybody chooses to sell their rights then the company won't get any more money immediately but eventually they will be taken up by somebody. Typically when the offer closes around 90% have been taken up (either directly or by whoever they are sold to) and the underwriters then have to deal with the rest.

One way or another then, TUI will get the money but the harder it is to get people to take up the rights the worse it generally is for the sp.

Hi Nath, thanks for the compliment. RIs are tricky as they are full or traps as a lot of the numbers are counter intuitive or misleading. I wouldn't pretend to be that knowledgeable but just know enough about RIs to be able to try to dispel some of the myths and misunderstandings.

In answer to your question existing shareholders DO NOT have to exercise their rights to the new (cheaper) shares to avoid 'dilution' - though more on this word later. If you sell your rights it has the same impact as exercising them. Using my very simplified example earlier:

If you had £1000 in shares these are now worth about £850. If you do NOTHING there is indeed a risk you will lose £150.

But if you sell the rights then you will be paid £150 in addition to the £850 of shares that you will still hold. So yes, your shares will be worth less but you will have been compensated fully for this. Btw I believe if you do nothing your broker will probably do this option as a default but I wouldn't want to rely on this.

If you take up the rights then, as you say, you will need to dig into your pocket and pay roughly £250 for new shares and your investment goes from £1,000 to £1,250. You have not gained anything, just invested more.

This is key to your last point. You will NOT I'm afraid be making more % profit doing what you have done simply because the new shares look cheap at 183p. The difference is simply that, as described above, you have just invested more and any gains will therefore be bigger but not as a % of what you have invested. This is one of the things that can mislead people. It looks like you are getting bargain price shares but these bargains are offset by the fall in value of the existing shares and all the shares after the RI closes will have the same price.

Once again I would stress that I am not advising for or against each option (and any in between) as that must be each person's choice based on what they believe about TUI's future prospects. All I am trying to is present factual stuff about the choices - the main one being they are financially neutral at the point you make them i.e. they lead to no immediate profit or loss.

Finally the word dilution in share terms actually means that future earnings are now spread over a larger number of shares - and this has definitely happened - for everybody The hope is that the increased funds can lead to an increase in earnings to compensate for this. Time will tell.

PS I see whilst writing this that beatrootjuice has given a good answer to you already so take your pick!

Thanks HarChris - though of course $800m revenue isn't the same as $800m profit - probably closer to $500m. Still big though!

Having said that your revenue figures didn't include BTC appreciation on HODL...

Because the price now already reflects that the RI will issue new shares at 183p! So, like always, it's just a case of how confident you feel about TUI whether you are thinking of buying or selling shares (or taking up or selling the rights).

@HarChris

I think the 666 is may be overstated as using the share of market approach always overstates production a bit (as it implicitly assumes our hashrate is always running to its maximum which of course it isn't). On the other hand ARB should improve efficiency with various tricks they have up their sleeve so swings and roundabouts.

Numbers are then OK but as you say you have ignored increasing difficulty which has approximately doubled every year recently (ignoring the China crackdown) and seems likely to continue that way as everybody tries to expand (though will be some casualties on the way).

What FinnCap did in their analysis was assume difficulty went up the same rate as BTC. A convenient and not that unreasonable assumption - if perhaps somewhat cautious.

If you do this then maybe your $50k figures are as good a stab at future revenues as any?

Would also point out though that PW made clear that machines already announced weren't likely to be only ones next year and by this time next year ARB will hopefully have more meaningful additional sources of revenue too.

Just thought I'd emphasise this as it may look like the value of your TUI investment has fallen by around 15% overnight.

This is not the case but it may be easy to think so if you look at your own portfolio at the moment (or just the share price). Brokers have different timescales as to when they make the Rights Issue options available to you. In the meantime if yours is like mine you will only see the value of your original shares which have indeed dropped by about 15%. What is not appearing yet (for me) is the value of the rights. When it does though it should balance out the drop in the original shares.

So if you're staring at your investments and see that the value of your TUI holding has dropped a lot since yesterday don't panic, it's just that one part of your investment is missing. So just be a little patient until the value of the rights does appear (if they haven't already).

"i paid nothing for these rights- zero, so everything was profit"

Sorry - but you did effectively pay for these rights. As you said the price dropped from 482p to 368p. It was this drop that 'paid' for the rights.

The same has happened today. The price has dropped around 15% and it is this value lost on the original shares that has been balanced out by the value of the rights now attaching.

Magnum - that may be true for you (and in a big way) but you did well to get in at the start of a new company. Some explode (like ARB) but most don't. Most investors I suspect are like me. BTC is much higher than when I first invested but I am in the red. So the reverse is true for us. But I was not referring to hindsight - I was talking about the future and for me miners still represent a leveraged play but that brings with it bigger risks which investors have to accept versus direct investment in BTC. I have, others won't.

Mada - As various earlier posts describe you have NOT lost 15% overnight. Broadly speaking that 15% is the value of the rights you now have to purchase additional shares.

To keep it very simple and using rough numbers, if you had £1000 of shares yesterday you should have about £850 of shares now + £150 in rights. So you are no worse off.

You can choose to sell these rights for £150 and be left with £850 in shares.

Or you can use these rights and buy more shares each at 2.15 euros (£1.83) in which case the amount of your investment will simply go up by the amount you invest (would be about £250 in this example so would give you £1,250).

Either option has the same value initially and there is no profit or loss - even though it looks like you are getting the new shares cheaply. It just depends on whether you want to invest more or not. The options should be clear from you broker and with most it just means clicking on the option you want that they give you. If you choose to buy more shares though you must of course have the money available in the account to do so.

Hope this helps.