Rolls Royce Rights Issue

room_101

Has anyone got shares in the at the minute?
My understanding is that if you have shares in the company as of 4th November you will be able to purchase 10 shares for every 3 you currently hold for the price of 32p each.  This means that the number of share in existence will potentially quadruple (13/3) if all shareholders partake.  

I've got approx 1200 shares which were obtained at an average of £6 over a number of purchases.  I'm not sure how or what to do now - I thought I'd ride it out initially, but it seems like lockdown and quarantine is going to last longer than I had expected.  I think I have the following 'options':

1. Cut losses and sell out
2. Hold shares and hope for recovery in long term to a point where buy in price is covered - or losses minimised
3. Purchase full RI amount of 4,000 shares (1200/3 * 10) at a cost of £1,280 to avoid share dilution
4. Purchase a smaller amount (if possible?)

This investment is not critical to me - I can afford to let it recover, if it will.  However, if I would be better to cash out now then so be it.

From reading up, they seemed to have turned the corner with the T1k premature wearing issue and had the bribery case resolved too.  There are some issues with XWB that I read somewhere - but this current predicament would appear to be mainly Covid related and a business model which did not anticipate a pandemic paralysing the industry for almost a year.  The main concern I have for their aerospace division in the medium to long term is the lack of placement in the single isle market.  They seem to rely heavily on the long haul market for their income and really need to get a product onto A320/B737 single isle type aircraft for the short haul market.

Would be interesting to read some other thoughts an opinions on what people would do in my situation or are planning to do themselves.

Thrugelmir

Immediate future of civil aerospace looks extremely dire. Personally I would use the money to fund a better opportunity elsewhere. 

Grenage

It's not a bad idea to look at any shares as if you didn't own them; would you buy them now - do they seem like a good deal?  If the answer is yes then buying the RI is a good idea.  If it looks like a poor investment then you could sell, and if you are unsure perhaps just sell the rights.

I'm quite a novice, but RR doesn't look remotely attractive.

ad1927

Grenage said:

It's not a bad idea to look at any shares as if you didn't own them; would you buy them now - do they seem like a good deal?  If the answer is yes then buying the RI is a good idea.  If it looks like a poor investment then you could sell, and if you are unsure perhaps just sell the rights.

I'm quite a novice, but RR doesn't look remotely attractive.

It looks like a huge gamble to buy shares in them right now.  As more shares come onto the market, I can see the value going only one way.  Some people suggest it should be nationalised again.  I am half tempted though, they are suggesting heading back to normality by 2022 and, in some ways, I think we may see that.  If I had shares, I would probably hold.  

coastline

Hard call to make although the RI would brink your average purchase price down from £6 to £1.60p. There's plenty chat on the link below.
https://www.lse.co.uk/ShareChat.asp?ShareTicker=RR.&share=Rolls-Royce-Holdings
Looking at what brokers say the 2022 forecasts are Sales £13bn, Profits £500m and earnings per share EPS 16p. That's before dilution so EPS would probably come in at 4p per share. ? If the new shares trade around the theoretical price of 54p then that gives a P/E of 14 which isn't expensive. All depends on travel next year as the company gets paid on flight hours regarding engines. Good times could return and profits could easily go beyond £1bn . Still a hard call.
https://www.marketscreener.com/quote/stock/ROLLS-ROYCE-HOLDINGS-PLC-4004084/financials/

drphila

Share price up 9% today so, on the face of it, it seems investors think it's a good deal

Username999

Now up 80% since the low of Friday!

itwasntme001

My Dad used to own this stock since the IPO.  Sold it end of last year luckily.  VERY luckily!!

room_101

Shares up To £2.45.
What is happening here - because I can see no good news in the media for them.  

Grenage

I've seen this before with rights issues; the last I can recall was Hyve Group.  The prices goes up rapidly and then drifts back down again.

Not that it will obviously go down; anything could happen.

drphila

I purchased these shares some years ago but they don’t really fit with my current portfolio and I certainly wouldn’t be buying any now if I wasn’t an existing holder. At the same time, I don’t want to lock-in the current significant paper losses I’ve made with this stock.

So in order to maintain my current holding value, I intend to tail swallow, ie sell enough of the nil-paid rights to cover the cost of buying the rest. As a non-CREST shareholder, I will incur a small dealing fee (0.5%, £15min.)

Incidentally, the LSE forum link provided above by coastline is very useful, and as far as I can see, the best discussion arena on the net.

A good intro to the whole area of RIs with particular reference to RR is given here:

https://www.shiftingshares.com/what-is-a-rights-issue/