Member Info for mole_man99

As VOD shareholders you don't want the SP to rise. The higher it goes, the more you have to pay to buy back those 1.4bn shares. Every penny up costs another £14m, assuming they try to buy them all back. Details not known yet.

Hi Narcus.

I don't think speculating on a SP hit from dilution is wrong. There are indeed now 7.4% more shares in circualtion than there were yesterday. VOD announced the share buyback which negated the impact, for now at least.

My reason for posting is to make a passive investor considering dumping a large portion of their SIPP into VOD for an easy divi consider both sides, that is all. Some may commit large sums on the basis that they have heard of VOD and it pays a divi. I would point out that the divi is not enough. You need safety of principle too.

I fell for VOD divi a few years back and paid the price losing it all on long term SP decline. I just let others learn from my experience. I don't think enough has changed for it not to happen again.

Have a good weekend and keep those portfolios balanced.

Shares in circulation are now 28.8bn but no repricing of share as it seems it is seen as laregly zero sum with the buyback, so you were right when you thought it was priced in.

No not keen on VOD still. It's all the little papercuts it gives for investors. This for instance means 1.4bn shares issued at £1.20, and now VOD will buy them back for £1.32 or higher if price goes up as holders wish, consuming all the towers cash.

Share buyback is a technical exercise to deal with the dilution from the mandatory convertible bond, so technically nothing gained or lost for existing VOD shareholders. Debt reduced £1.7bn, 1.4bn shares issued from treasury stock, spend £1.7bn buying them back, probably by issuing bond for £1.7bn to pay for it or using up the towers cash.

The merry-go-round keeps spinning.

'Verizon Launches $25 Billion Bond Sale to Pay for 5G Spectrum' - WSJ

VOD will have to find a way to expand it's debt to be part of the 5g party.

It's going to be interesting., The convertible holders are not actually going to want it to convert. They lose out as the SP is now below the minimum conversion price. Maybe VOD do some deal to roll them over.

They could employ some clever people who know the future of media consumption. One of the darlings of tech revolution is Roku. It's just a device to tap into your netflix etc, but a $47bn market cap as it is replacing cable boxes, and upgrading any telly to a smart TV.

VOD has a huge customer base across continents. It could become a destination of choice for going to your streaming service, through your VOD account using your VOD unlimited data, and when you have a billion people watching TV through your app, your gonna make some money.

But no you are right. VOD don't seem to have that kind of imagination.

You are a disciplined trader. Do you do this just with VOD. There are much better shares for your technique. Bigger movements to catch.

He must read this forum and my post past days saying they should get into streaming...

Convertible bond maturity date is 12th March.

Figures were from memory which was a bit skewy. £1.7bn, so €2bn, not €2.5. Min conversion price set at the time was £1.35, so convert to the maximum 1.2bn shares approx, as SP is below that level.
I say approx as bond terms say the amount can be adjusted from time to time, and maybe they have.

Yes VOD can't use capital to pay off the debt. That be the problem. 5G is coming and they need cash to buy up spectrum and dominate the market, but the credit card is already maxed out. Shame really.

The bonds were not seen as dilutive at the time as shareholders did not have to deal with it. They may think differently when 1.9bn extra shares get admitted for trading. The 'alchemy' they speak of was kicking the can down the road, raising money without diluting holders at the time. Maybe they do it again issuing another €2.5bn convertible to raise €2.5bn to buy back shares. Have to wait and see.

To answer Dan, I don't know when, they were just due to mature in March 21, and then another €2.5bn in March 22.

Well spotted Patient. A giant red flag for VOD that is has to use such working capital funding. You would think they had sufficient cashflow to the run the business.

They will maybe put €1bn of the €2bn target to debt downpayment? They have €61.3 of borrowings so it pays down 1.6% of that, so no real effect.
It is not a sufficient amount to deal with the €2.5bn convertible bond maturing this month which comes with approx 7% dilution. They may need to borrow more to buy back shares.
I remain bearish on the whole idea, and they should of chosen London to list, voted best city in the world for work again.

Correct if we stay in low interest environment. I was offering a possible explanation for the weak SP, as USA was freaking out over the prospect of rising rates. 10 yr treasury yields spiked too fast. We'll see on Monday if this resumes. The fed are insisting rates won't rise, but the market is seeing good growth which could bring on inflation and rising rates.

If USA rates do rise, it will suck money out of the UK markets as it goes hunting for yield in the US.

It's not an analogy, it's just a fact.
As rates rise, equities tend to fall, as those parking large sums demand a certain risk premium over bonds, and if the return on bonds/treasuries rise, then the expected return from equities needs to rise to maintain the premium.

If large investors see VOD mainly as a div payer, then the SP would decline to make the Div return more attractive over holding a bond, unless they can raise the div, which may be difficult at this time. They would need to borrow more, and fresh borrowings would come with a higher interest rate if rates are rising.

To break that cycle before it starts, VOD need growth.

Pairing the router with a 4g dongle is an interesting and good use of their own network. We're on only 4g router here. Without an aerial we would probably get about 10mb, which is useable in an emergency for sure. 50gb would last most households a week with streaming. I doubt a landline would ever be down that long. Says you can top up the dongle for no cost anyway.
VOD needs more of this. Start their own streaming service perhaps.

If rates do start to rise, probably 8% yield would be attractive as holders need to account for probable loss of capital.
Yes all stocks are a risk assets. I am generalising that institutional investors will demand a higher return from a risk asset than from a bond. With VOD, it's all about the divi.
With yields on fixed income seeming to rise, it can also cause issues with the Towers IPO. The €15bn estimate yields about 3.5% I think. They may need to drop the price to make it more interesting to institutions. This is only if the rate curve does steepen. It's being quite volatile and rapid, which is what is spooking the markets. It may settle down. The Fed are insisting they are not going to raise rates. The market does not quite believe them.
Many stocks on the Nasdaq were down 20% by lunchtime EST today, then ran all the way back up to flat by the bell. It was wild.
All these shananigans that happen in the states usually find a way of coming over here eventually, so you need to watch them for clues of what may come.

As VOD's main trick is the Div, it may be suffering from stateside concerns about rising interest rates. The SP needs to come down to make the yield more attractive.
US 10yr Treasury yield spiked above 1.6% on better than expected jobs report. It sounds small compared to the VOD div yield, but any rise probably needs a similar yield rise in a risk asset like VOD to keep it attractive on a risk reward basis, to the big money that is.
Just a thought for the death by a thousand paper cuts decline. At least it's not US tech, which goes down 10% to 20% a day at the moment. Super fun.

The search bar of that video sharing site we all know of course.