Member Info for RichTheNewbie

denman321 - As Toff pointed out the other day, the most important thing to realise is that these short positions get adjusted (in all likelihood) for the rights issue being taken up. So you have a short at the price you opened plus shorts for the rights issue amount at that price. Leaving you with a different price to what you expected (I think it's actually very misleading and SB providers should be forced to make it a LOT clearer).

All these arguments about the current price are a bit pointless.....since the current rise means people are now paying 55p per share rather than 50 before the rise (roughly) assuming rights are exercised.
The real question is what price this trades at in the weeks and months AFTER the rights issue concludes.
What'll be interesting is the price it opens on the ex-rights day. That could be a great short if it's much above 60p.

The key point in Toff's post is the adjustment for rights.

DanB45 - It's totally possible.
For most of October, until the deadline for the rights issue, you'll be able to buy shares for roughly 50p overall (by exercising your rights), assuming the price doesn't rise much.
Therefore, once the rights issue closes, who's suddenly going to pay over 60p, when they could have paid less for most of the month. If you've got any interest at buying shares below 60p you'd be loading up now.
So, where on earth would the buying come from, to push the price upwards, once the rights issue closes? Who's going to pay 60/70/80p. The only people who'd probably be buying would be people closing their shorts and if there was any half decent rise from say 50p would surely be met by a chunk of rights-issue profit takers and limit any rise.
It's harder to predict the price between now and the rights issue closing, but it's hard to not see it comfortably sub 70p as it heads towards those huge amounts of RI shares hitting the market, probably down to 60p and chunks lower is easily possible.

Never fails to amaze me quite how many dense people there are who still believe all these brainless COVID conspiracy theories.

I suppose that's the problem with social media - it gives a voice to all those people you'd previously have walked past in the street whilst they shouted at passing traffic for hours.

Anyone who doesn't take COVID seriously is a total numpty. You can survive and still have serious long term effects. It has also killed a huge number of people. You might not care but their families probably do.

I wouldn't buy now personally but it's not THAT silly buying now.....if you're taking up your rights issue shares then you're buying at about 50p very roughly overall. That might turn out to be a good price (it might not). It's certainly not completely mad.

This is exactly what happened with IAG.
IAG rose into the close on the day it announced its rights issue (10th Sept).
Then look what happened:
https://www.tradingview.com/x/RGh11m7k/

I think people need to be very careful with the "they can't go bust" logic.
It may well be true that, whatever happens, Rolls Royce continues as a company, even if they run out of money and someone bails them out, BUT, and it's a massive BUT, that doesn't mean shareholders can't be all but wiped out whilst the company continues.
As it stands shareholders are already taking a massive hit with all this dilution at 32p. The company being strategically important is no protection against being screwed as a shareholder as this shows.

To be honest it doesn't really matter much.
Once it passes 23 October, and you can't get cheap rights issue shares, who on earth would pay anything more than 60p for this, as for most of this month you'll be able to buy it for about 50p.
Therefore I find it hard to understand how the SP will manage to stay above say 60p in a few weeks time.

Simple fact is, that for the next few weeks, anyone can buy at about 51p overall by buying and exercising the rights, assuming the share price doesn't fall further (in which case it's even less).
So once the rights issue is done and dusted, where are all the buyers going to come from, wanting to pay much more than the 51p they could pay now (and for the next few weeks)?

Exactly sham: anyone buying now is buying at about 51p per share (assuming they exercise their rights which obviously you would if buying now). Historic prices are all irrelevant now - this is what it's trading at right now.

You don't need to borrow a share if you buy it....which is rather handy if you buy it now and the rights issue gives you three times as much at a third of the price.....

fahmad - and here lies the dilemma.....
Who's going to want to pay over £1 a share for this when you could buy it now for 116p and get more than three times that for 32p. That's about 668p for 13 shares in total or 51p each.
So essentially this is currently trading at 51p very roughly in all but name.

mline - problem is the bad news has already happened and mentioning it doesn't change anything. It's the precise reason most investors wouldn't have touched a stock like Rolls Royce because this happening was always on the cards. Just as it is for any company that's struggling for cash during this crisis.
There's no point saying this definitely won't hit 32p because that's just delusion. You had IAG shareholders saying it wouldn't hit their rights issue price when it was announced....but then over the following weeks it fell down to exactly that.
Nobody KNOWS what the price will do in the short or long term - however there's nothing to stop this getting to 50p comfortably. Maybe it will, maybe it won't, we shall see.

No shorter would be selling now. That would be insane. If anything the shorters will be buying now. Knowing they get a load of 32p shares. So they can short even more.

milnrow - RNS mentions the underwriters supposedly have short selling prevention clauses. Although I suspect these clauses aren't worth the paper they're printed on and that, as Ronnie Barker would say, there are ways and means, ways and means.

That's my understanding of it bhargav.
Purely based on what's happened lately with other companies and rights issues I'd wait until nearer the 23rd Oct to buy as I'd be surprised if this wasn't a lot cheaper by then.
Only my personal opinion though as I say (and mostly based on what's happened to others that have done rights issues lately).

Record Date for entitlements under the Rights Issue is 23rd October 2020.

Belfort - no but they can buy the stock now, get the rights issue, then start shorting this, knowing that they'll have lots of 32p shares to fill their shorts.
IAG was pretty flat on the morning of their rights issue....but then started fall over the subsequent weeks, down to near the rights issue price.