Barclays Rights Issue

huw01

I read today that existing shareholders will be offered a chance to buy new shares at a rate of 185pence, for one share in every four you currently own in this issue.

I currently have 500 shares which I purchased when they were 52pence back in 2008. I will therefore be offered 125 shares in the new issue at the 185p rate.

Is it a no brainer, or am I missing something ?

Archi_Bald

It's a no brainer if you are of the view that you will make a profit buying the 125 shares.

Ark_Welder

Existing discussion: https://forums.moneysavingexpert.com/discussion/4727480

grizzly1911

huw01 wrote: »

I read today that existing shareholders will be offered a chance to buy new shares at a rate of 185pence, for one share in every four you currently own in this issue.

I currently have 500 shares which I purchased when they were 52pence back in 2008. I will therefore be offered 125 shares in the new issue at the 185p rate.

Is it a no brainer, or am I missing something ?

AIUI

You currently have 500 shares worth (£1490 @2.98).

You will purchase 125 @1.85 total cost (1490 +231 = 1721). 1721/625 shares gives a price of £2.75.

If everything remains equal you will need to see a price of £2.75 or more to be making a gain from today's price. Over the last year they have been between £2.24 and £3.33.

If you do nothing you will fall back from today by £115 on the same basis (share price diluted to £2.75).

IronWolf

If it was me, I would subscribe to it, as to do otherwise would be to see your shares diluted - hence lose money.

You could sell them back immediately in the market for a small profit if you didnt want to hold them.

Masomnia

Personally I wouldn't look at my overall holding.

I'd look at it as purchasing 125 shares for 185p which I can sell on the market for 299p.

I'm guessing you can sell the rights? That might be worth thinking about if you don't want to increase your holding.

Ifts

Saw this over on TIM.co.uk -

How to survive a rights issue: As Barclays cash call deadline looms, what are investors' options?

Read more: http://www.thisismoney.co.uk/money/investing/article-2412182/What-shareholders-rights-issue.html#ixzz2e7KF3ieD

grizzly1911

Ifts wrote: »

Saw this over on TIM.co.uk -

How to survive a rights issue: As Barclays cash call deadline looms, what are investors' options?

Read more: http://www.thisismoney.co.uk/money/investing/article-2412182/What-shareholders-rights-issue.html#ixzz2e7KF3ieD

Interesting diversion from another thisismoney link from the above:-

While cash calls are usually fairly dry affairs, the announcement took a comic twist after it emerged that a regulatory release issued by the bank accidentally linked to a website selling bull’s semen.

The bank did not explain how or why the release linked to cattle firm Colyer, Herefords & Angus of Bruneau, Idaho.



Investors clicking on the link would have seen pictures of Taos Muncy, the 2011 PRCA World Champion Saddle Bronc Rider.

They could also have taken part in an Internet Heifer Sale or bought the semen of a ‘big ribbed’ bull named The Dude, with volume discounts available.

http://www.thisismoney.co.uk/money/markets/article-2412115/Barclays-Bank-fleshes-details-5-8billion-rights-issue.html

Ifts

grizzly1911 wrote: »

Interesting diversion from another thisismoney link from the above:-

Stock market slang for cash cow?!

cashbackproblems

i currently have 1185 shares book cost £4,162 at an average of £3.51

is it worth me buying into this? how much will it cost? surely when the shares are released the current shareprice will go down but by how much?

Ark_Welder

cashbackproblems wrote: »

i currently have 1185 shares book cost £4,162 at an average of £3.51

is it worth me buying into this? how much will it cost? surely when the shares are released the current shareprice will go down but by how much?

Entitlement is one new share for each four held on the ex-rights day. So your entitlement will be 296 ( = 1185 / 4, rounded down).

New shares are priced at 185p, so cost of taking up entitlement in full would be £547.60. However, you should not have to take all of them up if you do not want them, you could take up just some of them if you only wanted another £200's worth, for example.

Based on yesterday's close of 297p, the theoretical ex-rights price is 274.6. So the price of your existing shares would fall to this if Monday was the actual ex-rights date:

[FONT=Courier New]4 x 297 = 1188  : 4 existing shares
1 x 185 =  185  : 1 new share
          ====
          1373  : total price of 4 existing and 1 new share

1373 / 5 = 274.6  : [/FONT][FONT=Courier New][FONT=Courier New]ex-rights [/FONT]price at which shares should trade 
[/FONT]

In theory, whatever action you decide upon should be financially neutral to you. In practice, price movements after the ex-rights date and transaction costs will affect the outcome (costs would be for selling either the nil paid rights or the new shares once received, and your broker might have a corporate actions charge for taking up the rights).

[edit]
In additional practice, the fact that entitlement has to be rounded down to a whole number of shares can mean that holding a number of shares that is not divisible by 4 can result in the loss of around a quid or so (in this specific case, 4 being the 1:4 entitlement).