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That is such a naive article, talks about a 90% SP drop from £6.50 to 65p. These two numbers aren’t comparable as there was a rights issue between them. It’s actually a 61% drop as £6.50 pre rights equates to £1.75 post rights.
Tom to calculate the equivalent old price from the new, multiply new by 13, subtract 10x32p and then divide by 3. So £1.31 now is equivalent to ((£1.31x13)-3.20)/3=£4.61. All this multiply by 4 or 13/3 is nonsense.
I see it as a huge risk to hold a short at close today. The drop to the TERP in the morning benefits neither shorts or longs but from then on, the sight of a share price in the region of 78p is highly likely to pull in the uninitiated who will think there is a huge bargain to be had. I know I wouldn’t risk it!
From market close on 27th to market open on 28th there will be no difference in the profit/loss on any holding even though the share price will drop through the floor. This is because what you loose on the original shares will be equal to what you make on the new 32p shares. What happens after it opens on 28th is down to market sentiment so could go up or down. Shorts will not be making money due to the ex-rights share price drop and longs will not be loosing money.
Poleaxe, much of what you’ve written has made a lot of sense however I’m surprised at your comment about putting the farm on an ex-rights price of 80p. Why don’t you put the farm on the current price at £2.40, it’s exactly the same!