Share Dealing Discussion Area

Jake'sGran

sabretoothtigger wrote: »

Rights issue would be my first thought, they arent shares but the right to buy them at a certain price and have a value in themselves, an option to buy

Check their web site for info is probably best

I bought a BG single company PEP (£3k) years ago and eventually ended up with BG, Centrica and National Grid - very nice. It was actually worth something like £14K some time last year. I digress as usual. The broker who handles the PEP sent me a long correspondence about the rights issue and I completely misunderstood it. I think it was the way they worded it. I included a cheque for £600 thinking the rights were free new shares and while I was at it I would buy more National Grid. Wrong!
The lady who 'phoned said they would take the money for the rights (at £1.50 each) but what should they do with the rest? I felt really foolish. I have been buying ISAs, shares etc for a long time so it is amazing that I have done well out of it - baring the present upset.

sabretoothtigger

I read Utilities have been a good share relatively

The BP IPO was the best I think, people who bought made alot of money

bac_2

Is it worth putting money into DSGi Plc shares as they are at their lowest point currently, and looking to Christmas for an upturn in business?

Blah99

bac wrote: »

Is it worth putting money into DSGi Plc shares as they are at their lowest point currently, and looking to Christmas for an upturn in business?

My opinion: no. Steer well clear of Dixons. Don't be fooled that the recently announced measures to get people spending will actually translate to an uptick in purchases of discretionary electricals, which is DSG's core market.

sabretoothtigger

I noticed pc world is operating 500% markup on some of their items, well above and beyond the normal retail price for that item.

If thats how they make their profits, they could be in trouble when people tighten their belts and start looking for real value not just convenience

Computers are a natural deflationary item. If you want to invest in this sector I suggest doing it at the base such as intel with 3 bn on their balance sheet, much better idea then retail imo

tsmiggy

Could someone in simple terms please explain to me about a rights issue.I had A& L shares that were then converted to Santander shares,i was today sent a cheques to cover a rights issue.Where does all this actualy leave me.Sorry if i apear stupid.

cheerfulcat

Hi, tsmiggy,

Santander had a rights issue but there were some " complications " with extending the offer to UK holders so they simply sold the rights and sent out the money realised.

It leaves you with a diluted holding in Banco Santander and a cheque to bank - or you can use the money to buy more shares under the fee-free offer.

Jake'sGran

tsmiggy wrote: »

Could someone in simple terms please explain to me about a rights issue.I had A& L shares that were then converted to Santander shares,i was today sent a cheques to cover a rights issue.Where does all this actualy leave me.Sorry if i apear stupid.

I got a small cheque today too and must admit I have not read the letter yet. There has been so much happening lately. One thing you might like to think about is that foreign shares like Santander, priced in euros, are not considered by a lot of the financial pundits as a good idea as it is expensive to sell them and you are at the mercy of the ROE. You don't appear stupid. Perhaps you were a carpetbagger like me and someone on the radio the other day described us as being entrepreneurs. I did get a lot of free shares but, as things have turned out, we have not gained.
On Working Lunch yesterday the advisers all thought that it was sensible to buy
Centrica in their rights issue, ...phew...thank goodness for that.

Blah99

tsmiggy wrote: »

Could someone in simple terms please explain to me about a rights issue.I had A& L shares that were then converted to Santander shares,i was today sent a cheques to cover a rights issue.Where does all this actualy leave me.Sorry if i apear stupid.

A rights issue is when a company goes to the market to raise more capital. They release a brand new chunk of shares to the market that anyone can buy. However by doing this the existing shareholdings are diluted, therefore existing shareholders get the option to buy some of the new shares (proportionate to their existing holding) at a discounted price to maintain their holding value.

Think of it this way. Acme Corp is "worth" (ignore what that means for now) £1000. When Acme floated on the market they issued 1,000 shares valued at £1 each. Three guys - Bob, Dave and Steve - bought 333 shares each, costing them £333. Acme "received" £999 from all of these share purchases.

Now Acme wants to raise some more cash for acquisitions. The easy way to do this is to issue some more shares, right? The problem is that the "worth" of Acme hasn't increased since the first 1,000 shares were issued. So, if Acme issues another 1,000 shares, the value of each share is reduced by 50% because you have double the number of shares on the market "chasing" the same amount of "worth" in the company.

So Acme does a rights issue. Acme calls up Bob, Dave and Steve and says, "look guys, we need some more money. We're going to issue 1000 more shares, but as you're existing shareholders we'll let you have first crack at them at a discounted price. So for every share you already own, we'll let you buy a new share for a 25% discount - instead of paying £1 for each new share, you only have to pay 75p".

Bob looks at the offer and decides he likes it. He's happy with Acme Corp's performance and wants to maintain his holding in the company, so he buys 333 new shares at 75p. He's taken up his rights, and now his holding AFTER the new share issue will be exactly the same as before it. Remember, even though he's paid money and bought extra shares his holding in the company hasn't increased - Acme Corp's value hasn't increased, there's just more shares chasing the same amount of value.

Dave looks at the offer and decides he doesn't like it - Acme Corp is being managed badly in his opinion. He doesn't want to maintain his holding in the company, so he doesn't take up his rights - he sells his 333 "nil paid rights" getting some money for them but diluting his holding in Acme Corp.

Steve, like Bob, is happy with Acme Corp. Unfortunately he's not rich and doesn't have the money to take up his rights and buy the new shares. So instead he chooses to tail swallow. He sells some of his rights (eg, 165 of them), just like Dave did, but then uses the proceeds from this sale to take up the remaining 166 of his rights. That way he's reducing his dilution without actually spending any money out of his own pocket.

Make sense? I've simplified this a bit and my definitions are for ease of understanding rather than accuracy, but you should get the point...

bigg

If the shareholders vote against the Lloyds takeover and HBOS is nationalised, will the government buy my shares at the going rate or will they become worthless or reduced in value?

If they vote for the takeover, when do you need to be holding the shares to qualify for conversion to Lloyds/ TSB shares, or is it based on what your holding right up to the day they convert the shares?