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Impact on GraniteShares 3x Long Rolls-Royce Daily ETP (3LRR) and GraniteShares 3x Short Rolls-Royce Daily ETP (3SRR)
Overview
As part of its recapitalisation, Rolls-Royce is preparing to raise cash through a rights issue. Subject to shareholder approval at the General Meeting on 27 October 2020, Rolls-Royce’s shares will start trading ex-rights on 28 October 2020 (the ex-date).
How will rights issues impact 3LRR and 3SRR?
The total return indices tracked by GraniteShares Short and Leveraged ETPs use a methodology that aims to take account of corporate actions. In the case of a rights issue, the methodology assumes the rights are reinvested on the day before the ex-date so that the index value is unaffected at the opening of the market on the ex-date. In making this adjustment, the index neutralises the impact of the rights, just as the rights issue is neutral for investors in the underlying shares.
To put it another way, an investor with a £1,000 of exposure to either 3LRR and 3SRR immediately before the shares are marked ex-rights, still has a £1000 worth of exposure at the moment the shares are marked ex-rights.
With this index adjustment in place at the market open on 28 October and reflected in the price of both 3LRR and 3SRR, the two GraniteShares ETPs will track the daily performance of the underlying Rolls-Royce share price adjusted for the theoretical value of the rights as determined by the index provider.
How will the index be adjusted?
The index will be adjusted by a factor that takes into account the following:
The closing share price on the day prior to the ex-date,
The subscription price, and
The impact of dilution.
Additional details are available in section “2.1.4.1 Rights Issue Adjustment in Standard Index” of the Solactive Equity Index Methodology available by clicking here.
Please come back to us if you require any additional information and, once again, apologies for the tardy reply.
Regards
GraniteShares
A bad decision was to sell at loss, not to invest in RR...
Failed to buy the bottom? Yes, me too... I never ever managed to guess the bottom but fundamentals never change: Great company, almost historic low SP ( more pandemic inflicted than cyclical IMO) . Someone said, "Investment is the ultimate game of patience".
I am not spending so much energy analyzing RR as some of you obviously are and I do help myself reading your insights. Everybody painting RR in grey right now. BUT what if SP won't go mich below £1,- what if RI shares will be all bought up and not dumped right away for obvious reasons:
a) Current SP price is at decade lows (cyclical + covid19)
b)COVID 19 hysteria is going to have if not V then U-turn for air traveling cause effective treatments ( remdesivir, ivermectin) reduces the death rate of IC patients to 0.7% from 26% back in March. ( wait if Trump gets back on stage within 10 days, he will announce the beginning of the end to "Coavid19 Hysteria" & to "the second wave of economic destruction".
c) This (b) is what FED and ECB are planing for based on they're actions.
d) Vaccines need to be bought by all "playing ball" Countries although not significantly will influence the U-turn.
e) RR will very likely report quarterly profit some point next year while cash cushion will keep the company afloat.
Not long ago watched the president of one of the African countries talking about covid19 tests: they said they used tests on 4 fruits (papaya, mango and don't remember other) . Three came as Covid19 positive while only one as "false") Then he went " we buy imported tests for the imported virus so later we will import vaccines. Robbery in broad daylight".
I will probably hold, for now, I think the remaining thread of hope left for shareholders is AZ Pfizer and Moderna, who should have results available mid to late October.
Rolls Royce is in bigger problem and any news like hopes of travel restriction or an end to imposed self-isolation likely will result in a single green candle. Rolls Royce needs to start making a profit from its business - not humongous losses as at present time. I was also sure the bottom was a 2,- then reduced average till recant 1.5,-... It's not the bottom. The bottom does not exist right now.