Question about Open Offer

Wings_of_Ambition

Hello,

I hold shares in a company that are currently worth around 90p each. I received a letter saying that they're looking to raise funds and offering shareholders the opportunity to purchase 1 share for every 10 they own at a rate of 70p per share.

Am I wrong in my understanding that I could buy these shares at 70p and then sell them at 90p? Or if I can't sell them, that they would be worth 90p from the moment I buy them?

I'm fairly new to all of this, so apologies if it's been answered several times before.

Cheers

Wings

Lokolo

The new shares will dilute the old shares.

So if the company had 10 shares at £1, the total would be £10. Share price £1.

Now if the company decided to offer another 5 shares at 50p, then total there would be 10 shares at £1, and 5 shares at 50p. Totalling 15 shares at £12.50. New share price is then 83p.

Wings_of_Ambition

Does this mean the price of my current shares is likely to drop to account for these extras shares being sold?

Mikeyorks

It's called a rights issue. The likely effect is that the value of the existing shares will dip towards / or below the offer price.

So - you need to decide if the potential of the company is such that the price will recover, before you subscribe extra cash?

westy69

its an OO in this case and its probably Desire Oil? if so its just a case of if you believe in the comapny or not....

ses6jwg

arent desire the ones who are on the way to the falklands to start drilling for oil?

Joe_Bloggs

Is tail swallowing an option here ?
J_B.

fergusrssmith

So now this oil stuff is in the news and the share price is up to 117p, are you going to tell us if you bought in at 70p?
Hope you did!

Synchrouk

Watching the price of these too. Lets hope he took up the OO ;-)