National Grid Rights Issue

gatters

Hi,

National Grid announced a 7 for 24 rights issue at £6.45 per new share. 

Among the options are cashless take up "tail-swallowing" or selling of the rights. 

The price for the rights depends on the market. How efficient are these kinds of markets? Am I naive to expect close to £2.60 (Current share price - £6.45) per new share right? 

I don't particularly want loads more shares, so either of these two options would be convenient compared to buying the new shares and selling them myself. 

Any thoughts would be appreciated. 

poseidon1

https://www.lemonfool.co.uk/viewtopic.php?f=94&p=665641

OP, you may get  far more informed views and opinions from a dedicated investment forum of like minded investors in bonds and shares such as Lemonfool.

Hopefully the above link will take you straight to the NG rights thread. As one of the forum contributors pointed out,  rights issues from UK companies are becoming a rare occurrence  and the pros and cons of NG's seem finely balanced.

In your circumstances 'tail swallowing' may be the way to go, but if you are primarily  in NG for the dividend yield, might be time to reconsider your entire investment in view of the likely dividend dilution the rights will occasion going forward.

EthicsGradient

gatters said:

Hi,

National Grid announced a 7 for 24 rights issue at £6.45 per new share. 

Among the options are cashless take up "tail-swallowing" or selling of the rights. 

The price for the rights depends on the market. How efficient are these kinds of markets? Am I naive to expect close to £2.60 (Current share price - £6.45) per new share right? 

I don't particularly want loads more shares, so either of these two options would be convenient compared to buying the new shares and selling them myself. 

Any thoughts would be appreciated. 

The price won't quite be (Current share price - £6.45), since the existing shares get the final dividend (39.12p), and the new ones don't, so it's around (Current share price - £6.45 - £0.3912) . The prices I see are 889.4p and 200p - the calculation comes out at 205.28p.

I suspect that if you want to sell all the rights, it'll be a tiny bit more efficient to let them lapse and get the money from the underwriter process, rather than paying a fee to sell them yourself. But selling yourself does allow you to try and time the market, if the nil-paid price is moving a bit and you feel lucky.

Beddie

I had owned National Grid shares for many years, since getting them for free via privatisations, but sold out end of last tax year to use up the CGT allowance. I didn't buy them back, so missed out on this issue. Ah well.

EthicsGradient

Beddie said:

I had owned National Grid shares for many years, since getting them for free via privatisations, but sold out end of last tax year to use up the CGT allowance. I didn't buy them back, so missed out on this issue. Ah well.

The issue wasn't welcomed by the market - the stock dropped about 10% when it was announced on Thursday (and that was not the expected drop when it went ex-rights - that was another 10% on Friday morning). So you haven't missed out.

wmb194

The nil paid rights have been listed on the LSE under ticker NGPN. Looks like towards the end of trading yesterday they were c.212p.

https://www.londonstockexchange.com/stock/NGPN/national-grid-plc/company-page

gatters

Thanks for the replies. 

Francus

Bit off topic but has anyone actually received their Provisional Allotment Letter, enabling then to choose an option? 
I've still not received mine. Equiniti are pretty useless and after being passed from pillar to post are unable to email it to me. It's only two days till some of the options expire. 

MK62

No letter, but iWeb issued a Corporate Action Notice on 24th May, which gave the choice of 4 options (or 5 if you include doing nothing).
Buy your full entitlement, buy part of your entitlement, sell the rights, or sell enough of the rights to buy a portion of your entitlement.....or do nothing.

A._Badger

I also have received nothing from anyone in connection with this. Pretty shoddy behaviour, really.

maggie3751

Francus said:

Bit off topic but has anyone actually received their Provisional Allotment Letter, enabling then to choose an option? 
I've still not received mine. Equiniti are pretty useless and after being passed from pillar to post are unable to email it to me. It's only two days till some of the options expire. 

yes in the post this morning