Halifax Circular to Shareholders

vix2000

Have recieved this today and wondered if anyone could give a brief explanation of what its about in laymans terms, please?

ad44downey

They're probably asking you for even more money! If so, don't give them any. The housing market is at the beginning of a 2-3 year crash. Which explains why their share price has fallen off a cliff. Don't throw good money after bad.

jonesMUFCforever

They are issuing new shares ( a share rights issue) at a price of £2.75 each.

For every 5 shares held you get the option to buy 2 new shares at the above price.

HBOS share price has dropped alarmingly over the last month from £6 to nearly £3.

If you don't want to buy new shares you can sell the 'rights' on the open market or do nothing and get a cheque at the end of the process.

Only you can decide whether you think this is a good deal or not.

vix2000

Thanks, jonesmufcforever. How do I get a cheque for doing nothing?

jonesMUFCforever wrote: »

They are issuing new shares ( a share rights issue) at a price of £2.75 each. Ok, I understand this.

For every 5 shares held you get the option to buy 2 new shares at the above price. OK here

HBOS share price has dropped alarmingly over the last month from £6 to nearly £3. Not surprised with current market

This is where I lose the drift.
If you don't want to buy new shares you can sell the 'rights' on the open market Sell the rights, I assume, means I can let someone else buy the shares instead of me, but would anyone want them?

or do nothing and get a cheque at the end of the process. Why would I get a cheque if I do nothing, please?

Only you can decide whether you think this is a good deal or not.

napoleon

Yes, if you do nothing they'll send you a cheque.

vix2000

thats the bit confusing me. I can understand the buying more shares, and selling my purchase rights (even if no-one wants them), but if I do nothing why would they pay me?

jonesMUFCforever

As a shareholder you have a right to buy the new shares. If you don't buy them somebody else in the market will - this is why at the end if you do nothing you will receive a cheque.
The whole £4 billion issue has been underwritten by the merchant banks so Halifax will get their money whatever you do.

When shareholder approval has been given to this issue you should be able to see what the nil paid rights issue are selling for on the open market - you can decide to sell them then or do nothing and get a cheque at the end.

Browntrout_2

This is where I lose the drift.
If you don't want to buy new shares you can sell the 'rights' on the open market Sell the rights, I assume, means I can let someone else buy the shares instead of me, but would anyone want them?

The rights issue if voted through, will be fully underwritten by an investment bank or group of investment banks. For example RBS rights were taken up 95.1% so underwriters were left with 4.9% or about 300 million shares. Someone else is not the issue. these shares as per all large FTSE cos will be held in the majority by institutions, what the private investor does is not an issue in fund raising.

edit - whilst RBS was only 7% held by private investors, HBOS is different it is 27% held by private investors, less likely for take up, leaving rump to be sold into market or more possibly sovereign wealth fund or other investor...

or do nothing and get a cheque at the end of the process. Why would I get a cheque if I do nothing, please?

The NIL paid rights will trade (independently) on the market from 27th June, at todays price of 292p the nil paid would be expected to trade around 17p, i.e. the difference between the 275p rights price and the share price. If you do not take up rights or sell them into the market you will be sent a cheque for the value of the nil paid on the closing day.


The danger for the bank and the market in general would be the undermining of confidence should the share price fall below the rights price resulting in little take up and the underwriters being left with £4Bn of HBOS to sell.

Remember - it's always darkest before the dawn, if the rights are trading pennies in a few weeks they might be worth a punt on their own!

details online here

http://www.hbosplc.com/home/free-dealing.html

vix2000

Ok, I get it now. So with the price dipping badly a decision left to the last minute would be best, then. Thanks for explaining it.

jonesMUFCforever

vix2000 wrote: »

Ok, I get it now. So with the price dipping badly a decision left to the last minute would be best, then. Thanks for explaining it.

Not necessarily!
If the share price improves in the next few weeks it might be better to sell whilst the going is good.

As I said to previous poster to each their own over this.

vix2000

but I was under the impression that you can't sell your right to buy until the trading date anyway?