Member Info for Poleaxe

The underwriters will only end up buying them if the unexercised rights can't be placed on 13 Oct. As long as SYNT are trading at a premium to 197p on 13th Oct, that won't be a problem.

Freedom4Uall, that's correct, less about £15m expenses, about half of which will go to pay the underwriters for taking on the risk.

SYNN are the tradeable nil paid rights. You'll need to subscribe another 197p per SYNN share in order to become fully paid SYNT.

It follows that SYNN track approximately 197p below SYNT.

That means when there's a 1p drop in SYNT there's likely a 1p drop in SYNN.

Given holders now have 1 SYNT plus 6 SYNN for every SYNT held at close on Wedndays it follows that every 1p fall in SYNT equates to a 7p fall in the pre rights price, or about 1%.

SYNT are off another 18p today.

The underwriters are there to guarantee the company receives 197p for all the rights shares. That means they don't have to stump up anything, as long as the market values SYNT at more than 197p, because they'll be demand for the rump placing.

The underwriters are paid fees of 2.65% of gross proceeds, plus reasonable costs, charges and expenses.

Unfortunately, holders are now down almost 40% in value from Wednesday's close.

Value now: 237 + 6*38.2 = 466.2p

Whilst SYNT may only be down 15% from TERP, the majority of the value of the holding shifted into the nil paid shares, SYNN, which is effectively a geared instrument.

Sorry, a typo. Should say

Sell 824 nil paid shares at 42p (not 45p) = £346.08

Yes, it certainly is a term. It's what some people do if they want to maintain their level of investment in the company but don't want, or have the means, to increase it.

There's an equation to work out how many nil paid shares to fund taking up the remaining. I think it's along the lines of:-

#Rights available * issue price/ (current nil paid rights sell price + issue price)

e.g. suppose you hold 1,000 nil paid shares and you can get 42p selling your nil paid rights. Issue price is 197p

1000*197/(42+197) = 824

Sell 824 nil paid shares at 45p = £346.08

This funds taking up 346.08/1.97 = 176 rights.

LOTM-13, I may have misunderstood but have you done the sums on what the price would be needed to raise £272m on a 3 for 10 basis on pre-consolidated 467m shares in issue? About 194p I think, on shares trading at 60p (before the rights announcement).

The destroyer of value is the company and the need to raise £272m when the market cap is only £200m.

Believe it or not, it doesn't really make any difference if you do it as 6 for 1 at 197p or 3 for 1 at 294p or 2 for 1 at 591p. A shareholder wishing to take up their rights in full will end up paying the same amount. One of the main drivers of the rights ratio is the underwriting, which is easier and cheaper to obtain if the rights price is lower (if the issue bombs the underwriters get a bigger chunk of the company for their money).

What do you mean by dilution? Why does it bother you? Yes, if you don't take up your rights in full your percentage stake in the company will be reduced, which might concern you if these have significant voting power. Otherwise, you are compensated at a fair market price for the rights you don't take up, either by selling or lapsed rights proceeds.

Xtw2, I'd forget the notion of the rights being cheap (discounted) shares.

If you decide not to take up the rights you can sell them, or simply let them lapse and receive lapsed rights proceeds. If you add the 197p to the price you could have otherwise sold the rights at you'll find it comes to much the same as buying ordinary new shares.

Contrary to how companies like to portray them, rights issues don't really give existing holders any preferential price over new buyers, as is apparent today with holders last night being over 20% worse off than buyers in the market today.

(based on close 749p, SYNT 252p + 6 * SYNN 53.5p = 573p)

Pseudonym, you are of course absolutely right. I'm completely off my trolley. Apologies to you all. They won't get placed until 13 October.

How very foolish!

LOTM-13, the share not subscribed for (the rump) will be placed, probably this morning, by the underwriters acting as agents for the company (the underwriters only need to buy the shares themselves if the rights issue bombs - i.e. trades less than 197p ex-rights).

I'd expect an RNS on this later today. The price is set for the lapsed rights shares (placing price less 197p less minor costs).

Price will probably be suppressed a bit this morning while the rump is getting placed.

For every share held at close last night I believe you now have

1 x SYNT (currently about 266p)

+

6 x SYNN nil paid rights (currently about 64p). Logically SYNN will trade about 197p below SYNT

I make that 650p. If correct, clearly it didn't pay to hold out for the rights entitlement.

Candidinvestor, I wouldn't go quite that far but I do think they're a bit of a con trick and get missold to investors who don't really understand them. Perhaps hardly surprising, given the amount of misleading information and the use of terms like 'discounted'.

HeresHopin, that's a good description of the rights shares.

People should understand that if they take up the rights they're not really buying the shares at a discount. The overall cost of taking up the shares isn't just 197p per share, it's 197p per share plus whatever they might otherwise have got selling the rights. From your description, you can see that amounts to much the same as simply buying the ordinary shares in the market, like anyone else.

You don't obtain these rights for free either. The 'discount' is offet by the drop in value in your existing holding when they commence trading ex-rights (tomorrow).

Rights issues are basically a blag for more money!

I agree, it should be!

Just to add, don't expect to receive lapsed rights proceeds for spreads/CFD longs. The providers will almost certainly charge for any rights shorts being 'taken up' but you'll have trouble getting them to reciprocate in crediting longs. Then they set the rules.

Freedom4Uall, the statement regarding "Do nothing" is inaccurate. At least, if describing a normal UK rights issue.

As long as they have some value (i.e. SYNT is trading above 197p on Thursday) the underwriters will procure subscribers for the remaining rights shares via a rump placing. They will not end up buying them themselves. The net proceeds of this placing will be distributed to the shareholders. It is not retained by the underwriters.

This rights issue is fully underwritten. However, if they are forced to buy them at 197p there won't be any value left to distribute as lapsed rights. That being the case, the nil-paid rights would have probably been worthless too, so they'd have also been no value in selling them.

Holders should face up to the fact that they've lost all but about 38p per original share. Taking up the rights (overall equivalent in cost to simply buying more ordinary shares in the market) or letting them lapse isn't going to change that.

The underwriters will only buy the shares if the rights issue bombs and the shares trade ex-rights below 197p, which I very much doubt.

Any rights not taken up by holders will be placed as a rump on Thursday morning. Those holders will then receive their share of the lapsed rights proceeds.