Member Info for Poleaxe

Pokerchips, I don't need to be on the record. That's an administration date for mailing allocation letters. By your argument you'd need to have bought on or before last Wednesday in order to be on the record and qualify for the open offer . That's not correct.

Did you read this clarificantion from Atlas Mara over their open offer, presumably when they were hassled by confused PIs?

https://markets.ft.com/data/announce/detail?dockey=1323-13325764-3F10R9RQPHKL9OI557N41BRCD0

Pokerchips, I bought day. I saw the trades go through the market.

All that matters to the vast majority of folk these days is the ex date. Back in the days of certificated shares a couple of times I sold between record date and ex-date and was required to return the allotment letters to my broker, in order that the entitlement could be forwarded to the buyer. It's spelt out on the documents you receive.

With dividends the ex-date is usually a Thursday and the record date a the Friday. That's a convenience for T+2 settlement and means there isn't the hassle of market claims. I'm sure it would be more convenient if open offers and rights issues were done the same way, with the record date the date after the ex date, but this would disadvantage certificate holders who wouldn't receive their allotment letters through the post in time for the ex date.

For most investors this is probably just a geeky technicality but as a trader it's important to understand the significance of ex dates (and the insignificance of record dates).

If they only commence trading ex-entitlement from tomorrow how does it not follow they traded cum-entitlement today?

FWIW I bought a few shares today in my nominee account. I fully expect to be able to particpate in the open offer, not that it's very attractive at this level.

Pokerchips, I fear you're over-thinking the issue! As I said, I don't want another protracted thread about this. Educating some RR. holders was such an uphill struggle.

For whatever reason, companies still word rights issues and open offers in a way that seems to mislead a lot of inexperienced PIs. Occasionally they are forced to clarify, as occurred with the Atlas Mara open offer some time ago.

https://markets.ft.com/data/announce/detail?dockey=1323-13325764-3F10R9RQPHKL9OI557N41BRCD0

Note how they also describe the Record Date of 8 August as the "Mailing Date" for entitlements.

Note how the ex-entitlement date is 11 August and how they've clarified that close of trading on 10 August is the time by which shareholders need to own shares in Atlas Mara in order to participate in the Placing and Open Offer.

Pokerchips, I've no desire for a protracted re-run of the RR. debacle.

The ex date is all that matters to PIs with nominee accounts. The record date is used for the allocation of provisional entitlement letters to certificated holders. Holders who sell between the record date and ex-date should forward these to the buyer.

What do you suppose the "ex-entitlement" date means?

You cannot decree retrospectively that shares bought prior to the open offer announcement don't qualify. That would be trading in a false market.

Narada, youll get given the opportunity to buy more shares at 30p on the basis of a minimum entitelemnt of 1 existing share per 6 you hold at close today. You don't get them for free. They want your money.

Don't be bamboozled by record dates. They go ex-entitlement tomorrow, meaning any shares bought today qualify for the open offer.

I think it depends on the pricing. The lower the price, the more of the company the placees stand to acquire for their money. The lower the price, the more existing holders will be disadvantaged if they don't take up the shares (unlike a rights issue the entitlement isn't tradeable).

In order to reduce the dilution existing holders can apply for more than their basic entitlement. How much extra they receive will depend upon how many people don't apply for their minium allocations.

PeterSW, in the results RNS on 21 April they said:-

"The proposed equity raise is expected to be in the range of £190m to £240m and to be undertaken by way of a Firm Placing and Placing and Open Offer."

If that's the case, existing shareholders will not have the opportunity to take up sufficient shares to avoid dilution of their stake in the company. How much they get diluted will depend upon the relative size of the firm placing. If you want to avoid dilution you need a rights issue, but it's likely the company felt shareholders might balk at the prospect of being asked to stump up another 150p per existing share held. Also, they might not have been able to obtain underwriting at a credible rights price.

I've seen these situations before and companies seem to consider they've met pre-emption, provided they have an open offer, even if it is a bit of a token gesture.

Clearing the debt is one thing but that won't reduce the accumulated losses, not directly anyway. Profits will be required to clear the accumulated losses. It's my understanding that companies cannot pay dividends if there are accumulated losses on the balance sheet and clearing £637.5m is likely to take 5 years min. worth of profits.

Reducing the debt should at least reduce interest payments and increase profits.

Dividend?

Others may know better than me but I thought under company law it was forbidden to pay dividends when you had accumulated losses on the balance sheet. As at 31 Dec 2020 accumulated losses amounted to £637.5m. That's going to take a while the clear!

I know sometimes it's possible to wangle a capital reorganisation to clear the losses but I think the company ought to be in better shape first.

I'm one of those who think that's optimistic. Personally, I think getting the issue away at 60p would be a good result. That would mean about 350m new shares to raise £210m. If the majority is raised through the firm placement, existing holders would be lucky to be offered as much as 1 for 1. Just a wild guess, I could be way out.

I think it would be better for existing holders if this was done via a rights issue, but that doesn't look like happening. It's difficult for the market to assess at the moment, not knowing the proportion of the company that will be dished out in the firm placement.

Basically, I'd say it's determined by how much the investors are willing to pay.

i.e. what slice the company they want for their money.

i.e. what slice of the company they take off the ordinary investors.

Problem is Uncle_Doug, this is not going to be a rights issue. It's going to be a placing with an open offer. At this stage there's no knowing how much of the fundraising will be through the open offer but potentially the lion's share could be in the placing, with token scraps dished out to PIs, just sufficient to claim they've meet pre-emption obligations. We'll see.

Perhaps underwriters got burnt in 2018 and they weren't willing to take on another rights issue. A rights issue would have been fairer for PIs.

When there's a rights issue shares can either be traded with the benefit of entitelement to the rights (cum rights) or without (ex rights). When a stock moves from cum rights to ex rights (like TUI did today) holders at close the previous day receive rights. These are issued in the form of tradeable rights shares, which can be sold or exercised to be converted into fully paid TUI shares.

Naturally there's a benefit in receiving these rights. When a stock loses this benefit it falls in price, as happened to TUI today. The TERP (Theoretical Ex Rights Price) is the price at which the value of your holdings is the same as it was at close the previous day, when the shares were still trading cum rights. It takes account of the value of the additional rights shares you've acquired (in the case of TUI the tradeable rights shares should track about €1.07 below the value of the existing TUI shares).

That's correct, they are up about 30%. Yesterday the shares included the benefit of receiving the rights issue shares. From today the rights are separated off and from Tuesday will be tradeable as separate shares on the LSE. Once you factor in the value of those rights you'll find you are significantly up.

Your broker calculated a closing price of 296.95p excluding the value of the rights. I calculated a TERP more like 306p. It may depend on the exchange rate they use.

It's fallen because it's gone ex rights. Buyers today no longer have the right to apply for more shares at €1.07. Market is slowly waking up to the fact.

It was a brilliant exit for holders this morning. If I'd been a holder I'd have sold and shorted more to cover my rights entitlement. You could have banked almost 40% gains from last night.

Yes. The rights on the DIs will commence trading in London next week. The rights on the underlying shares are already trading in Germany.

I don't get why these are still trading so high. These are trading ex-rights. the rights are 25 for 29 at €1.07. Doesn't that imply a TERP of about 306p from last night's close of 486.9p?

Yet they're still trading at 400p. If the stay at this level the rights will be trading next week at around 300p. That's a valuation of around 660p per share held last night - a 35% gain.

Where am I going wrong? Why is TUI holding up so high?

casapinos, I don't understand, how does the rump placing represent an over £200 million bonus for RR? The proceeds (less the 32p and minor costs) get distributed to the lapsed rights holders. Rolls-Royce were always going to receive 32p per every new shares, regardless. No more and no less.