IAG Rights Issue

mastubbs

Hi All,

I was hoping for a little help. I currently have some IAG shares held in an AJ Bell ISA. As you may have seen, IAG are raising money through a 'rights issue' at the moment due to help their balance sheet through the corona crisis. Today the IAG share price has fallen through the floor (-30% ish). I am fairly new to investing and this is my first time holding any shares in an ISA. The information out there on what this means for current investors, our options now, and the timetable to exercise those options, is scarce and very difficult to understand for the uninitiated.  I was wondering if any kind person with any knowledge on the subject could explain what is happening here, and what the options are? I think this would be really helpful info for myself and the many others in my situation who will be confused by this. 

IAG have produced a 'prospectus' with a timetable (here: https://www.iairgroup.com/~/media/Files/I/IAG/capital-increase-documents/en/prospectus.pdf) but the terminology does not make much sense to me. Terms like 'ex-rights' are frequently used, but not explained. To make mattes more confusing, the 'offer price' is E0.92, however for myself and many others our existing shares have been purchased on the LSE, not the spanish market, so it is hard to know how this will be managed in practice.

Thanks so much in advance for any thoughts, insights, advice or 'an idiots guide' (which i think is what myself and many others really need!)
Matt

sooty900

Been looking myself and found this. We have three options on the letter. Not sure what to do myself yet either.

Shareholders had four options. They could either buy some or all of their allocated stock; they could sell all their rights; they could sell some of their rights and potentially use the proceeds to buy some of the cut-price shares (known as ‘tail swallowing’); or they could do nothing at all.

THE EX-RIGHTS PRICE

The price of the newly-issued shares was fixed, and set below the prevailing market price. In order to calculate the price the shares should fall to after a rights issue, all things being equal, analysts seek to calculate the theoretical ex-rights price (TERP).

How does this work? Let’s suppose an investor held 100 shares in IAG ahead of its issue – we’ll use the listing on the Madrid stock exchange as the issue was priced in euros.

The market price of the shares was €2.21 the day before the terms of the ‘three-for-two’ rights issue (i.e. shareholders could buy three shares for every two they already owned) was announced. The subscription price for the extra shares was set at €0.92.

The value of the investor’s holding before the rights issue was €221 (100 x €2.21). If they decided to take up their full allocation they would have had to buy 150 shares at the new price of €0.92. In that case the amount of cash passing from investor to IAG would have been €138.

In order to arrive at the TERP we have to divide the new total value of the investment by the number of shares. In this case €359 divided by 250 to give €1.44.  At current exchange rates that translates as 133p, or slightly below the share price as we write.

sooty900

Not sure I want to invest anymore so I think I will just sell my rights as doing nothing doesn't seem an option. We only have until 11am on 21st September to choose and it must be done online.