RE: Right’s or wrong16 Feb 2025 17:41
OK, to misquote Hello Hello, I will say this only once... No, inappropriate but still funny at times. A right issue in context, same rules apply to all with a bit of context from a retired professional. If in doubt, just read a few.... dull as reused dishwater but legal documents.
Small placement: Small capital rasing. Most (not all) quoted PLCs will have in their annual documents the board asking permission to place up to 10% of new shares at less than 5% discount current SP in order to raise small quick capital without having to go to the market or ask anyone, it's already signed off. Usually placed with 'friends' and ordinary shareholders don't get a look in. Small, very small dilution of your equity (they get to buy at 5% discount, you don't) but almost zero fees.
Open placement. Bigger capital rasing, more than 10%, but slightly risky for the Directors (not much!). They offer shares to all current shareholders at a discount to current price, it's not underwritten and if it fails they will look very silly... but open offers very rarely do. As a shareholder, if you don't take the offer there's nothing, if you do the shares are yours at that price. They can't sell any 'non taken spares' into the market.
Rights Issue. Large capital rasing. They issue Rights to all existing shareholders in proportion to the shares they already own. Everyone, big, small has the 'right' to buy their proportion of new shares. No dilution of your %equity but you need to stump up new money. Rights issues always underwritten (if the SP completely collapses, the underwriters will guarantee the money, hence the RI price is so low relative to current SP because it's money for old rope, it's a free feeding at the trough).
Reality. The moment a company issues a RI statement the SP always, always takes an immediate hit. It's a huge sell signal but.... some City boys and girls are up and at work in time to read the 7:00am RNSs and the market isn't open until 8am so when it opens, it's too late for us, the market has already reacted. But get a set of terms (13 for 20 at 264 in this case) and a timetable. Critical dates: the ex-rights date (03/02) and the nil-rights placement date (midnight 17/02, morning 18/02), all the new shares will be on someone's books morning of 18th, there is no 'drip' of the new shares, they're all in play. Any 'drip' is just a few in the City unloading a few they didn't really want to keep but it was just easy money buying the lapsed rights.
PNN at the moment isn't doing what you would normally expect the SP to do during the couple of weeks from RI until conclusion. But I think the impending OFWAT pricing review and all the HMG interference in that process, way more political rhetoric than any basis in sound economics, is why it's all over the place.
No one really knows what's going to happen with the pricing review but at least PNN have the capital stashed under the carpet in the meantime.
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