M&S Rights Issue - their email - sell rights?

DIYhelp76

Hi

Hope someone on this forum can help.

An elderly relative holds M&S Shares.

She's received an email about some "rights issue" M&S are having to do with raising money for a link up with Ocado.

The email says to ensure your shareholding is registered so that when the time comes you can buy OR SELL rights.

Know next to nothing about shares and stuff. Can anyone tell me in a nutshell if this means my relative can sell some "rights" to make some money? Don't really understand what this means.

She doesn't want to sell her shareholding as the shares are at a bad price at the moment.

Many thx in advance.

MovingForwards

I would be phoning m&s on the number held on official paperwork and not responding to the email / clicking any link or calling the number on the email.

See what m&s say needs to be done.

Malthusian

I am also a bit suspicious of the mention of "selling her rights". Typically in a rights issue the shareholder has the option to pay money to buy more shares at a special price.

Has she given her email address to the M&S investor relations team?

If she doesn't want to invest more money in M&S she should simply do nothing.

alanq

Malthusian wrote: »

I am also a bit suspicious of the mention of "selling her rights". Typically in a rights issue the shareholder has the option to pay money to buy more shares at a special price.

Nothing suspicious with that. If one does not wish to take up the offer of discounted shares one can sell the rights to someone who does. I have done this myself.

steampowered

This is a perfectly normal part of a rights issue.

During a rights issue, all shareholders are given a right to buy some of the new shares, at the rights issue price, proportionate to their shareholding.

Any shares which are not taken up by existing shareholders will then be offered to new shareholders.

Imagine that the rights issue price is £10 per share. But - when the rights issue finishes - the stock market price is £12 per share.

Your relative could either:
- Take up her right to buy more shares at £10 per share.
- Do nothing - in which case her rights are sold to a new investor - and she pockets the £2 the difference.

If your relative wants to buy more M&S shares, she should take the opportunity to buy more shares at the discounted price.

If your relative does not want to buy more M&S shares, she should just sell her rights. This will probably happen automatically if she does nothing.

Nothing to be concerned about this is all normal practice.

DIYhelp76

Steampowered,

Thank you so much for taking the time to reply and for your clear and helpful explanation.

I understand now so can advise my relative and she can decide what she'd like to do.

Tom99

If she sells her rights she will reduce the value of her shareholding, if she takes up the offer she will increase the value of her shareholding by investing new money.
Sometimes there is a 3rd option which is to sell some rights and use that money to take up the remaining rights, so a neutral position which will leave the same amount as now invested in M&S shares.

Tom99

M&S are due to announce details of the rights issue on Wednesday along with their full year results.

AnotherJoe

Tom99 wrote: »

If she sells her rights she will reduce the value of her shareholding, if she takes up the offer she will increase the value of her shareholding by investing new money.
Sometimes there is a 3rd option which is to sell some rights and use that money to take up the remaining rights, so a neutral position which will leave the same amount as now invested in M&S shares.

Did you mean in the generality, eg if everyone sold their rights their would be more shares? Because if she owns say £10k worth of M&S shares now they wont be taking money off her shares.

Tom99

AnotherJoe wrote: »

Did you mean in the generality, eg if everyone sold their rights their would be more shares? Because if she owns say £10k worth of M&S shares now they wont be taking money off her shares.

Say she owns £10k worth of shares and the rights to more shares can be exercised at a cost of £2k, or they can be sold say for £2k.
If she sells the rights for £2k then the shares she retains (same number as owns now) are likely to be worth £8k. If she exercises her rights and invests £2k then the increased number of shares she owns are likely to be worth £12k.
Alternatively she may be able to sell half the rights for £1k and exercise the other half paying £1k after which her increase number of shares are likely to be worth £10k ie the same value as now.

AnotherJoe

Ok that works in the generality but for any one individual seller it doesn't make a jot of difference what they do unless they are say Woodford with £2bn worth of rights (just an example I don't know that he has) OP's Mum selling her £2k is irrelevant and IMO it's totally misleading to state that if she sells her rights her shares will drop in value as if they are specially marked or she can control the share price. The shares will do what they do when you take all the rights uptake into account. One small shareholders holding is irrelevant.