What if HBOS Goes Ahead with a Right Issue?

debbie42

This is all it says on the Halifax site:

Important Notice Regarding the HBOSplc rights issue

• HBOS is raising £4.0 billion new capital from shareholders through what is called a rights issue, subject to shareholder approval.
• The rights issue will offer existing shareholders the right to buy 2 new ordinary shares for every 5 existing ordinary shares at 275p per share.
• Shareholders do not need to take any action now. More detailed information will be available later.

royeee

knights wrote: »

Does anyone know when shareholders will be offered the new shares and when the option will have to be taken up by. Is there a site I can refer to to get this information?

regards

If this follows the pattern with RBS it would be by around within a month of approval. Short timeframe, I know.

ad44downey

Don't give them any more of your hard-earned cash.

HBOS shares are down another 3.5% today so far. The housing market is about to tank and HBOS is over exposed.

earlgrey_3

ianmr65 wrote: »

Companies have rights issues when they want to raise more money... blah, blah (copyright of another website but not credited).

Companies on the up often do rights issues, not just to raise capital, but to help make the share price more manageable than 30000p per share or whatever. Dell, and ebay did this.

Ianmr65, despite copying that from another website, you seem to be getting very muddled between share splits, script/bonus/capitalisation issues, rights issues etc and possibly adding to some of the confusion that seems to be around. No new money is raised from the former as it is with rights issues.

RBS had a 2 for 1 bonus issue in May last year and that was totally different from the current proposed 11 for 18 rights issue. The only similarity with a rights issue is that just because you owned three times as many shares afterwards didn't mean your holding was worth three times as much.

In simple terms, after you subscribe to a rights issue the value of your holding with any luck will be about what it was before plus the additional money you paid for the new shares. When the shares go ex-rights the share-price shares falls to reflect the value of the rights no longer attached. A lot of factors then affect where the share-price goes from there.

PS. A definition for you here of what a split is... http://moneyterms.co.uk/share-split/

Tozer

ad44downey wrote: »

Don't give them any more of your hard-earned cash.

HBOS shares are down another 3.5% today so far. The housing market is about to tank and HBOS is over exposed.

Down 3.5%....but the rights issue is at a 45% discount!

debbie42

Tozer wrote: »

Down 3.5%....but the rights issue is at a 45% discount!

If a company offers loads more shares in the same company at a big discount, what exactly will happen to the old shares? The value will drop. OK, so the overall worth of the company will increase, due to the cash injection, but not by some magic such that the overall share value increases massively by more than the cash injection.

purch

due to the cash injection

and of course depending entirely on what the Cash is used for.

If it is just in order for the Bank to reach it's Capital Adequecy target, then it hardly can be argued that it is increasing the overall worth by much

Tozer

debbie42 wrote: »

If a company offers loads more shares in the same company at a big discount, what exactly will happen to the old shares? The value will drop. OK, so the overall worth of the company will increase, due to the cash injection, but not by some magic such that the overall share value increases massively by more than the cash injection.

Rights issues generally don't have a huge affect per se on the share price. It is the rationale for the rights issue. I think HBOS are doing the prudent thing.

I suspect the share price will actually rise before the issue as the market takes on the shares before they come ex rights.

I'll be taking my full allocation, thats for sure.

debbie42

Tozer wrote: »

Rights issues generally don't have a huge affect per se on the share price.

It depends how they are distributed, as to the effect on price. If you have masses of new shares being offered at less than the current market value then how can the current price be unaffected, unless they are differently traded shares?

ianmr65

earlgrey wrote: »

Ianmr65, despite copying that from another website, you seem to be getting very muddled between share splits, script/bonus/capitalisation issues, rights issues etc and possibly adding to some of the confusion that seems to be around. http://moneyterms.co.uk/share-split/

erm i never mentioned script/bonus/capitalisation or stock splits issues, i only wrote (copied) about rights issues, and which also have the effect of diluting stock value, thus reducing prices. This was answering the OP.
This is called journalism. Explaining facts in an easy to undertsand and accurate way, using examples, that people can grasp, without getting bogged down in irrelevant detail.

The fact that earlygrey and purch are confusing matters by being overly precise with definitions, and terminology, and jumping in to correct with answers to questions that haven't been asked, means they may might make demonstratably excellent financial advisors or brokers, but i'm afraid poor journalists.