Member Info for Poleaxe

Bhozdan:
"As long as the price is above 32p shortly after the closing of the Rights Issue, you can expect to receive a payment representing roughly the difference between the share price and the 32p cost."

Your broker is telling you what will happen if you do nothing and let the rights lapse.

If you let the rights lapsed the shares will get placed on 12th Nov. Any amount over and above 32p will get distributed to the lapsed rights holders, including you. If anyone tells you if you let your rights lapse you'll receive nothing, this is not true.

The rights are worth something. In fact, they'lll be worth more to you than than the original RR. shares. If you don't fancy taking up the rights you can always sell them. If you decide to take up the rights you forgo the money you could have got by selling them or letting them lapse.

I obviously meant if you're long at close on 27th. Even I'm getting confused now!

As MJK1 says, if you're long from 28th you receive the rights. You receive these rights in the form of new nil paid rights shares. These shares have value and are tradable on the market (ticker RRN?), just like the RR. shares.

In fact, the majority of the value of your position will now be in the rights shares. If RR. trade at close on 27th at 240p you might expect them to trade at around 80p the next day, with the rights trading at about 48p. Given that you get 10 rights for every 3 RR. shares that means the total value of the rights per existing RR. would be 160p.

In other words, whilst for every existing RR. you lose 160p in value in RR., you gain 160p in the nil paid rights shares.

selecta6, what confuses some is the record date (at close 23rd). It doesn't just confuse PIs it seems to confuse those who advise PIs too.

It's crazy and has been like it for the 20+ years I've been trading. You have to ask why it isn't explained better.

It’s difficult to find reliable information and you have to work a lot of it out for yourself. Sorry, but you can’t rely on what you get told by a broker customer service desk, or a company’s investor relations desk. All they’re really interested in is getting you off the phone ASAP. It would be different if it were their wealth at stake but it’s not, it’s yours.

People buying shares this morning tells you more than some dodgy website or some telephone support kiddo. There are the people with skin in the game. No-one on their rights minds would be paying 240p for the shares if they didn’t believe they’d come with the rights entitlement. Without the entitlement the shares would only be worth about 80p.

Traders made an absolute killing on the HMSO and IAG rights issues. They’re now doing the same at RR. Wealth moves from the ignorant to the somewhat less ignorant.

It’s difficult to escape the conclusion that there are vested interests at stake in not educating PIs and they’ll present information in as confusing matter as they can get away with. Knowledge is power.

You need to put the work into trying to understand the workings of the market, otherwise you’ll just be nutrition for the numerous sharks out there.

Obviously wrong ratty, otherwise why would anyone be paying more than 80p this morning?

Come on, think it through. If I sell today and my broker says I must hold on 28th and the buyer's broker says they must have held on 23rd, where have the rights gone?

This is why there's an ex-rights date. Prior to that shares trades cum rights. From that date they trade ex rights. It's not up to the broker to set their own ex rights dates.

pappalazz, re your 21:13 last night. Think it through. You are saying that anyone who buys from now won't be eligible for the rights. You are also saying that no-one selling before 28th will be either. So neither the buyer or the seller is entitled? How does that work? Where have the rights gone? Who's snaffles the nil paid rights shares? They will be worth about 65% of your current holding.

You can decide when you've seen what the rights trade at from Wednesday.

You thought right Numnut. You can.

You don't have to take up your rights. You could always sell them. As it stands at the moment, selling your rights would reduce your average cost by about 160p per share.

According to my calculations, you paid 230p for your original shares and take up your rights in full your average price will be about 77.7p. Anyone else agree?

ROCKONUK01, I think that is shockingly misleading advide from a broker to say,

"To take part in the event, customers must hold Rolls Royce shares at close of business on the record date (23 October 2020). "

What if any of their clients buy RR. tomorrow (26th) or Tuesday (27th)? Are they seriously going to say they're not entitled to receive the rights shares? If they did, they'd be depriving the clients of about 65% of the value of their shares. That would be outrageous.

How on earth are PIs supposed to understand rights when they receive advice like this? The FCA should long since have stepped in the clean up rights issues. I guess if they did, companies would have trouble raising funds so easily and would have to pay even higher fees to the underwriters.

I think a lot of people will have done that arms999, including me. If you sold at close on Friday in order to profit you'll need to buy back from 28th below about 80.85p (before minor dealing costs), or buy the nil paids below 48.85p. That seems a reasonable punt IMO, even if they do trade a bit higher before then.

No-one knows for certain though. Investing/trading involves risk and sometimes you take a loss.

I use the L2 Dealer platform. It's got a pretty dire user interface but does the job (I'd advise using parent + wave orders. That way you can add small orders and move partial fills, without incurring minimum commissions).

You can also use the old web platform, but I don't. I think you have to enable the DMA option in settings somewhere. For some reason they don't seem to support DMA on the new platform, which seems a bit weird.

It's not just CFDs, you can DMA shares too with IG. If I'm trading long an AIM stock I'll try and do it off SETS in ISA account. Can trade the auctions, no stamp duty, no CGT and currently no dealing costs (in theory they kick in over £25k but I've not had them). What's not to like?

The auctions provide good liquidity. PIs can trade them. It depends on your broker. E.g. with IG you can trade on the SETS book (direct market access). That's how I shorted in this evening's auction.

Thanks selecta6.

I fear you were a bit unlucky setting a sell limit of 241.5p Had you set 241p I think you might have got filled. During the normal trading period the highest a trade went through off the book was 241.1p. 243.7p was the auction uncrossing price. Unless LSE place limit orders on the book in the closing auction (which I suspect they don't) you wouldn't get filled.

I think they'll likely trade lower on Monday because they'll be some people thinking they're ex entitlement, but they may not. For that reason I did place a short in the closing auction. I've therefore rather shot myself in the foot explaining all this. I'm a bit stupid like that. However, I'm hoping the folk here only represent a small percentage of the total number of confused people in the market!

Actually, provided you hold at close on 27th, you are allocated rights shares and you don't have to pay for them. That's why they're called nil paid rights. They'll trade under their own ticker (RRN ?). If you want to convert a nil paid rights share them to fully paid RR. shares you'll need to pay 32p per rights share.

it was the word "dividend" that bothered me. I think they mean "ex entitlement".

There must be people involved in the back office administration who could explain all this to shareholders. It's almost as if they still resent the big bang and deliberately want to confuse PIs and keep them in the dark.