RE: Your TUI Investment Hasn't Just Dropped 15% in Value8 Oct 2021 22:23
Again thanks for your answers gents - I will need to look into details about the rights issue being fully underwritten.
Coming back to one of my previous points though.. using your "£1000 worth of shares" example (as it's easy to follow) -
If you had £1000 in shares, these are now worth about £850. However, from what you've said you now have the following options:
1) Sell the rights and be paid £150, whilst simultaneously still holding £850 worth of shares, which were previously worth £1000 (purchased in my case at 330p – so lets say 303 shares now worth £850).
or
2) Take up the rights and purchase more shares at a fixed value of ~£1.83. So if you had £1000 worth of shares at 330p originally, the number of new shares you’re entitled to would be ((1000/3.3) / 21) x 10 = 144 shares. At the price of £1.83, this would require you to spend ~£264.
So if you sell the rights then I agree, you’re not really out of pocket and if you take up the rights, you haven’t gain anything, YET. However, the point I’m making is, if you’re investing at these levels because you believe in the company has potential upside from here, then (if you're right) you will get more from your money taking up the rights. Continuing with the two examples above, lets say the SP increases from current levels to 350p,
In example 1 above; your £850 investment is now worth £1060.5 (you were also compensated £150 from selling the rights, so you actually have £1210.5 in total).
In example 2 above; your investment is now worth £1564.5 (£504 of this is just from the new shares purchased at the lower price, and with further % increases in SP, the gains will become even wider from example 1).
So, if you’re invested here because you believe your investment will grow from these levels, then it seems to me taking up the rights clearly gets you more for your money?
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