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You should only take up the rights if there's a good investment case to do so. Minor costs aside, taking up the rights is no different in cost to simply buying the shares in the market like anyone else.

robsaunders: "The rights are priced too cheaply. The only way to get he rights is to buy he shares in the market."

The rights price is mosty determined by the underwriters. It really makes no difference to someone who wants to take up the rights in full or part if the £2bn is raised as 10 for 3 at 32p or 1 for 1 at 106.666p or 2 for 3 at 160p. For a given investment they incur the same percentage dilution, on none if they take up the rights in full. Why does dilution matter anyway?

Whilst it's true you'll only receive a rights entitlement if you hold RR. shares at close on 27th October, this does not mean it's the only way to obtain the rights. Nor does it mean it will be the cheapest way of buying the shares.

After 28th October you'll be able to buy the nil paid rights. Then, if you wish, you can exercise them at 32p to receive fully paid RR. shares, just like any other rights holder. If the nil paid shares trade more than 32p below RR. this will be a cheaper route to buying the shares. This happened at HMSO a few weeks ago, when at one point it was about 10% cheaper to buy the shares via the nil paid rights. I think this occurs where rights are deeply discounted and people have to sell some to tail swallow. This can make the nil paids a bit of a bargain.

Or you can bide your time and simply buy the shares ex rights. It's quite likely you'll be able to buy shares cheaper on the morning of 12th November than anyone buying RR. now and taking up the rights.

You'd probably be better off spending the time considering the prospects for the company rather than trying to examine the minutiae of the trade reports, especially if you don't understand how they get reported.

As long as the shares are trading at a premium to 32p, the rights not taken up (the rump) will get placed on 12 November. If the shares trade below 32p there won't be a market for the rump and the underwriters have to buy them. That's why they're paid £55m. If the rights bombed completely the underwriters would pay about £2bn to acquire 77% of the company.

If you buy/hold now for the rights, you're going to take a big clonk on your existing investment when they go ex-rights on 28th October. That clonk is offest by the value of the entitlement to buy more RR. at a discount (hopefully) to the level they will trade at after 28th October.

Rather than take that clonk, you could just wait to buy the shares on or after 28th October. Overall that could work out more expensive or it could work out cheaper, that's down to market volatility. It may be that the best time to buy will be on 12th November, when the rump gets placed. That's what happened at HMSO, but there's no guarantee it will happen here.

No problem. If you still want to invest, buy them ex-rights in three or four weeks. Or buy the nil paid rights and exercise them. There's no rush.

ToffAppleton1, I did point out that you'd miss out if the share price subsequently rises, which would be the same as any other potential investment. You clearly think it will.

The payment you get by selling your rights isn't exactly 'nominal'. In the example I gave of cum rights 230p the share price can be expected to fall by about 66%. This value gets transferred into the nil paid rights shares which, if you wish, you can sell in full to recuperate that 66% (you may receive more or less depending on market moves).

If you want to maintain your current level of investment in RR. you can tail swallow. Unless you're a big player planning to exert voting influence, why are you're bothered about 30-35% dilution?

If you want to increase your investment you could take up your rights in full. But you could increase your investment at any time and over and above the rights allocation. Rights don't actually give you a special deal over anyone else in the market, not when you look at the true cost of taking them up.

I'll just add, there's a lot of confusion and trading shenanigans goes on around rights issues, especially when they are large and heavily discounted like this. I'm not qualified to advise anyone on the best way to play this and, in any case, it's difficult to generalise with rights issues because the circumstances are different in each case - the size, the discount and the reasons for the fund raising. Look what happened at HMSO a few weeks ago.

There seem to be two quite common misconceptions about rights:-

1) You must subscribe to them or lose money and more the heavily rights are discounted, the more you will lose out. This is not true because, unlike an open offer, you have the option to sell the rights. They are like a voucher which entitles the bearer to purchase more shares at a discount. these vouchers have value and are tradable.

2) The more the heavily rights are discounted, the more attractive they are as an investment. This is not true, if you're going to take up the rights or tail swallow there's no difference to you in 10 for 3 at 32p or 1 for 1 at 106.666p. The reason rights get heavily discounted is the underwriting. The lower the rights price, the more of the company the underwriters stand to acquire for their £2bn if the rights issue fails. At 10 for 3 at 32p they'd get 77% of the company. At 1 for 1 at 106.6666 they only get 50% the company. (BTW, RR. are paying £55m to underwrite the rights).

KerryG, with a rights issue the rights you can sell the rights if you don't wish to take them up. You receive your rights as nil paid shares on or shortly after 28th October. Thses shares are traded on the stock market alongside the regular RR. shares (they may have the ticker RRN).

What you lose in the value of your existing RR. shares will be offet by the value of the nil paid rights. If RR. trade cum rights at 230p they will trade ex-rights at about 77.7p and the nil paid rights will trade at about 45.7p.

That's a drop in value in RR. of 230 - 77.7 = 152.3p
but you receive 10/3 nil paid shares per RR. share, in total worth 0/3 * 45.7 = 152.3p

Therefore if you don't want to take up the rights, you can sell them and not be any worse off. You only miss out if the share price subsequently rises.

If you want to maintain the same level of investment in the company you can sell some of the rights to fund the exercise of the remaining rights. At the current price this will dilute you investment in RR. by 30-35%. Does this matter?

(if you want to tail swallow you may find you get a better deal selling the RR. shares to help fund the rights, but decide what's best on the day).

You're not forced into a rights issue. Unlike an open offer you don't lose out if you don't want to take it up. The only way you miss out is if the share price subsequently rises, but that's the same with any potential investment.

When in 2018 was the market cap 27.18bn? Do you mean in USD?

The highest closing price I see in 2018 was 1,018p on 3rd August. The shares in issue was RNSed on 31 July 2018 as 1,869,591,137. From that I make the market cap £19bn. Perhaps I've got the numbers wrong. It's not really that important, apart from showing 300p this year or next seems rather optimistic.

Fahmad, the rights at 32p are not a 'bargain' because that's not the total cost of taking them up.

Do you realise the rights have value and will be tradable, via the nil paid rights shares? (ticker possibly RRN)

With RR. currently trading at 230p the nil paid rights shares would be worth about 45.7p (32p below the ex-rights price of 77.7p). If you decide to take exercise the rights at 32p you'll forfeit the 45.7p you could have otherwise received selling the rights.

You won't receive the nil paid rights shares for free either. You've paid for them in the RR. shares falling in price when they go ex-rights (in this example from 230p to 77.7p).

With rights issues, there's no such thing as a free lunch!

Given the articles in the financial press on rights issues are often poor it's not surprising investors get confused and temped to take them up when they're not always a sound investment. If they were invented now I think the FCA probably wouldn't permit them, not for retail clients anyway.

Fahmad, 300p this year or next? Are you sure about that? I think that would imply an all time high market cap of £25bn. I don't think they've ever got much over £20bn, and that was back in 2014.

Only take up the rights if you believe in the prospects in the company. The deeply discounted 32p rights price is a red herring, because what it really costs you is 32p plus the cash you could have got selling the nil paid rights shares. That value in the nil paid shares will be offset by value your original share drop when they go ex-rights on 28th October. Rights isues aren't a free lunch!

If you want to maintain your existing investment you can always 'tail swallow' the rights. Yes, you will suffer some diultion. If RR. trade at 200p cum rights that dilution will be about 35%. If they trade cum rights at 250p that dilution will be about 30%. Why does dilution matter to you anyway?

Coupled with all the rights arbitrage positions it makes it difficult to make any real sense of the short percentages, unless it included the HMON shares. Did it?

With such a dilutive rights issue I'd have expected a significant reduction in the percentage shares short post rights, but there could be an increase in the number of actual shares short. What are you interested in, and why does it matter?

What I was getting at was, are these percentages based on the number of HMSO shares shorts against the HMSO shares in issue on those dates.

In other words, on 24th is it 25.2% of 153m
and yesterday 7.1% of 3,831m

If so, the number of shares short in HMSO would have increased significantly. Perhaps this is correct, as some HMON shorts been rolled into HMSO? I don't know. It's not obvious to me.

Knowing the actual number of shares (rather than the percentages) would make this clear.

Are the 25.2% and the 7.1% based on the same number of shares in issue? The rights became fully paid HMSO on 25th September and obviously make a huge difference to the number of shares in issue. In this case, it would be clearer if the shorts were declared as number of shares, rather than a percentage.

If a fund manager lends stock out for shorting, where do the lending fees go? Do they benefit the fund, or do they benefit the fund manager?