hbos rights issue no longer attractive?

batterme

Hi,

I just got my pack from hbos yesterday inviting me to take up on their rights issue.
We all know how badly the share price has been performing lately, so why would I buy shares at £2.75, when I can buy them for less on the open market?
Obviously when this process was first started, shareholders would benefit from getting discounted shares, which was a no-brainer, but now....

What are you all going to do??

John

earlgrey_3

batterme wrote: »

Obviously when this process was first started, shareholders would benefit from getting discounted shares, which was a no-brainer, but now....

Sorry to tell you that rights issues are never 'no-brainers' whatever the discount. They are an invitation to invest. As a shareholder you own the company so any discount you receive is always reflected in the value of the shares you already own.

A simplified example for you. If a company is worth one million and there are one million shares the shares will be worth 100p. If it offers another one million shares to shareholders at 50p the company will be worth £1 million plus the half million it gets for the new shares - £1.5 million. Now there are 2 million shares in a company worth £1.5 million, so the shares are each worth 75p. The shareholder has what he had before plus what he paid for the rights. Whether it's a good deal depends on the return.

In reality it's a bit more complicated than that.

There's already a thread about this you might like to read... http://forums.moneysavingexpert.com/showthread.html?t=887245&page=5

Banderman

What? Even more HBOS shares?

Rather you than me - I'd rather have another hole in the head!

earlgrey_3

Banderman wrote: »

What? Even more HBOS shares?

Rather you than me - I'd rather have another hole in the head!

Well.. if I'd bought yesterday at 265p, as they were, and sold today at 292p, as they were, that's a hole I wouldn't mind. If only life were simpler. :rolleyes: