Reply With QuoteGood luck!Originally Posted by Raffe
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Bought back my futures earlier but I just went short again bigly.
Good luck!
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Already sliding, pity didn't fill all of my sell orders yet.
I still have some Rolls Royce shares and the rights issue has finally been triggered, apparently it means existing shareholders will be able to buy 10 new shares for every 3 they own, at 32p each.
It sounds tempting to go this route, if anything to bring my average share price down to allow a quicker exit if needed, what do the great and the good here think about rights issues and future of companies that hit this emergency button?..
What does your purchase price have to do with the ability to exit a trade? If you cannot sell a stock at a loss, you should never buy any equities.
What you are suggesting is to throw good money after bad.
Someone who lies about the little things will lie about the big things too.
I did sell a chunk of shares at a loss previously and since recovered that back, its now slid 2/3rds triggering the rights issue, essentially I would rather have a holding of shares at £1.80 for a small extra investment rather than sit back and wait at £3+.
Yes I could sell my holding at a big loss, but its at the point of I would rather keep them and risk the remaining investment, although the share price is at a 17 year low I feel they will recover to at least what my average would be with a further small investment.
I asked the question as I have never gone through a rights issue with an investment before..
If your shares are on a platform like HL, they will send you all the info you'll need. In fact, I think any platform you own the shares on should do so.
OK, lets have a look.
Let's assume you are owning acompany between yourself and ten buddies, everybody owns 10% of the company. Let's asume the company has issued 1 million shares, so you hold 100,000.
Now the company has run out of cash and quite urgently needs to raise fresh capital. They decide to do that via a rights issue.
That means, that you get the possibilioty to buy 10 new shares at 32p for every 3 shares you already own (note I am using the RR ratio). The share price is 117p when the rights issue is announced (also correct for RR).
So we calculate:
- your position of 100k shares is worth £117,000 the day before this is announced.
- the company is worth £1,170,000 the day before of the announcement.
- the company will issue 3,333,333 new shares at 32p each, raising £1,066,666
- theoretically, the company should be worth what it was before plus the value of the new cash after the rights issue. But in reality, that may be different. If the company was trading at a distressed price before, the availability of new capital should remove a distress-discount and the value maybe higher. If there are doubts that the new money is enough to see them through, the new valuation may be less that the sum of old valuation plus new cash. To have a clue what the market thinks: how did the shares react to the announcement? RR traded down on Thursday, so lets agree the market wasn't enthusiastic.
- the issue is subject to confirmation at a shareholder meeting on 27 October. No approval, no rights issue. No rights issue, looming bankruptcy, so it will likely go through
- some time after the EGM, the rights will be booked into your account and start trading.
- so now you own 100k of RR shares plus 333k of rights allowing you to buy new shares at 32p. The value of your rights is easily calculated: for three shares you get 10 rights. If we assume the shares of RR will trade at 113p (closing yesterday), that means: Value of the company: 1,000,000 old shares multiplied by 113p plus 3,333,333 new shares at 32p = £2,196,000. Price per share after new equity is issued: £2,196,000 divided by new share count of 4,333,333 = 50.67p. Hence, value per subscription right is 50.67p - 32p = 18.67p.
- Now you have the choice of doing nothing (= instructing your bank to sell the rights), meaning you will get 333,333 (your rights) * 18.67p = £62,233 and still own your 100k shares, but they are only worth £50,670, total value = £112,903 (5k less that at the time of the announcement, which reflects the lower share price yesterday (113p) versus the share price at the announcement (117p) and some rounding in my simplified calculation. Trouble is, you only own 2.3% of the company now, versus 10% before the rights issue.
- The other choice is to exercise your rights, meaning you buy the 333,333 new shares at 32p. So you now own 433,333 shares at 50.67p (= £219,569), but have to invest your own cash (333,333 * 32p = £106,666). You still own 10% of the company, but had to put £106k of fresh money to maintain that level.
- What's the difference? Well, do you believe the company will pull through with the fresh cash? Then put new money on the table and buy the shares. You don't believe in the company? Take money off the table.
Since many investors don't know what to do, many are selling so many rights that the cash allows them to exercise the remaining rights (selling 210k rights for £39,000, which buys you 121k new shares), meaning they don't put new money on the table but also don't take any off the table. You will however going forward own a substantial smaller share of the company (100k + 121k = 221k, which is 5.1%, versus the 10% which you owned before).
^^^ thank you for that explanation Raffe.
Wow Raffe, really appreciate your detailed response, based on one read I understand about 70% so will try and absorb all this great info..
At the conclusion of believing in RR, looking into their restructuring, future projects and military contracts I feel they’ll be okay, I’m happy to play the long game but not the loss game currently, if I come unstuck then at least I know the reality of where I am referring the rights issue, thanks again..
The above example is calculated with yesterday's closing price, actual new share price and resulting value of subscription rights will obviously depend on trading between today and approval of rights issue.
Understood, I did think the opening price of the rights issue was going to be 96p based on 3x 32p, then the share price dropped even further which made me second guess this figure.
With 3 trading weeks to go the share price could be anything come rights issue day..
I'm still sitting on the sidelines...
I'm not sure at this time a "rights issue" is good news if you are buying!!
I left some of my short Nasdaq futures on over the weekend and had put a quick trailing stop on it on Friday evening. The market closed at 11,254 after hours and I wanted to give it 100 points, but I never make it exactly 100. So I typed 11,367.
The high this morning was 11,365.75, now trading at 11,302 and my position is till alive. Wow, that must have been the luckiest escape ever, missed it by one single point in thin and volatile trading.
Difficult to know when the UK market is going to settle down - I have had my main pension fund in cash for some time now and I keep getting letter/notifications from my pension fund management company (or probably their computer), saying "Please check your investments are suitable for your retirement plans" - and, "You need to ensure your investments are in the right place to achieve your retirement plans" ............ presumably their way of saying that "cash" is probably not the right option ...........but as I said I suspect that it is computer generated
Or their way of saying that cash doesn't earn them any kickbacks.
Anyone going to mention Ncyt!!
Only at £6.52 today. Oh how silence falls from the nahsayers. Lets wait till they are brought out and shares double before we rejoice too much having purchased at below .79p
RIAC
What does that even mean, 'brought out'?
You wait for your last doubling, that is fine by me. How are your alt-coins doing? I suppose you sold them 5 minutes before their respective all time highs?
Alt coins did poorly, lost around 3-4K on them, but lets not distract from the expert not quite being on point regarding these shares.
There’s a suggestion that a major Pharma company would like to / are in talks to buy Novacyt. No doubt that will further advance their share price at takeover
Last edited by 100thmonkey; 6th October 2020 at 06:56.
RIAC
Good for you.
I have never claimed to be the expert on medtech or pharmaceutical stocks. What I have said is that there is considerable hype around the sector and that there is a one in ten chance of success for any of the vaccines touted (it is actually less than that) and a moderate chance of success for the tests. I have offered to bet against any single of them coming to the market within the suggested time frame, I was taken up on the bet by one member and won it. Nobody has asked me for a bet against Novacyt, I would have taken it like any other (not even sure I would have lost it as we never discussed what the actual deliverable is and the timeline). I am not sure their tests are already fully approved, maybe you can educate us about it (not a lot of press releases by the company)?
For every winner like Novacyt, there are at least ten losers which will linger in the portfolio for years until they jump on the next hype wagon to pump their shares. Somehow, people never tell us how many of those they own....
Also interesting that winners always sound like there have been tens or hundreds of thousands invested and people preparing to retire on the gains while losses are almost always a few hundred or low thousands. If any of the players would introduce me to their process to size the bets so that winners get all the allocation and losers only crumbs, I would pay for that information.
Well done holding all the way up - certainly not for the feint of heart these AIM shares. I dabbled a bit, lost 40% initially, but sold too early on the re-rate ending up with +20% after trading in and out. They just got awarded a £400m+ contract by the UK government, which compared to its market cap - is pretty significant. I stuck a bit more back in as finding a massively profitable company (>80% margins) on AIM is rare.
Did you invest (take a punt) in other covid shares? I still stubbornly hold onto Avacta but for some reason, I can't get myself to sell it when in profit.
I wonder after 70 pages and almost 3500 posts;
Does anyone know 'when stocks rebound, where best to invest?'
Nope.
Anyone buying into BP or any oil at all?
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Yep.
At the stock exchange.
Toying, but not the Majors again. Maybe Total as divi not cut. US is running down oil stock volumes so there will be a rebound...
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I keep looking at BP and Shell and thinking “surely this will be the bottom of a big trough on the graph in 3 years time?
Plus, the dividend will be double or triple what the cash would earn in the bank, even if things don’t improve!
What’s to lose?
We will all be wind powered soon apparently and electric is ever advancing so perhaps oils had its day!
RIAC
Really interested to know how this works on a still day.
Unfortunately, I bottled Novacyt far too early. The leveraged position made a few K, not in my DNA to hold spread bets for too long when they are up - hence why I must not give up the day job.
Just listen to the BEST:
I have a few BP, currently trading at a small loss as my other shares are but I have now accepted the head in the sand scenario while shouting La La La La La La!
The U.K. plan is that when the wind doesn’t blow and the sun doesn’t shine electricity will be supplied by gas fired power stations that sequestrate the carbon dioxide.
The first of these planned is Net Zero Teesside https://www.netzeroteesside.co.uk
Fossil fuels aren’t disappearing. They will complement wind and solar power. Otherwise we’d be fooked on a cloudy still day.
Just wait until Tesla supplies us with their cheap batteries.
Someone who lies about the little things will lie about the big things too.
The capacity of a Tesla model S battery pack is 100 kWh.Just wait until Tesla supplies us with their cheap batteries.
Net zero Teesside gas fired is planned to produced 800 MW or 800,000 kW enough to power a modest 3 million homes.
Therefore, you would need the equivalent of 8,000 model S battery pack to produce 800 MW for one hour.
Let’s say that this is backing up wind and solar, and that you need to use batteries to supply 800 MW for 5 days while you are waiting for the wind to blow again, you would need the equivalent of 960,000 model S battery packs.
And you have to use the wind and solar to charge the packs.
You can see why a fossil fuel power station with sequestrated carbon dioxide may be the winner.
It was a joke.
Someone who lies about the little things will lie about the big things too.
I know.
But, I like a bit of science and maths to demonstrate how ridiculous the idea of batteries are.
Current batteries yes, I'm just waiting for Elon to announce a battery the size of a AAA that will power New York for 6 months - then the shares might have some substance..
There are other battery technologies, such as molten salt, heard about them on Radio 4 podcasts ages ago. Googling "battery storage power station" you get the following on Wikipedia:
Mitsubishi installed a sodium-sulfur battery storage facility in Buzen, Fukuoka Prefecture in Japan with 300 MWh capacity and 50 MW power. The storage is used to stabilize the network to compensate for fluctuations caused by renewable energies. The accumulator is in the power range of pumped storage power plants. The batteries are installed in 252 containers. The plant occupies an area of 14,000 square meters.[31][32]
A 108MW / 648MWh high-temperature sodium-sulfur battery was deployed as 15 systems in 10 locations in Abu Dhabi in 2019. The distributed systems can be controlled as one virtual power plant.[33]
Alternatively you'd look at pumped water facilities or compressed air storage, if geography allows
A number of years ago, a company I worked with was gifted a 2mw battery to use in a non interconnected location.
As with every other similar previous prototype, this ended in a puff of smoke (literally).
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FTSE v DOW last month, who do we blame
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What's your point? The FTSE was up 0.3%, the DJIA 2.5%.FTSE v DOW last month, who do we blame
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It's been said many times that the DJIA and FTSE cannot be compared, for one the DJIA is price-weighted and as such most of its performance comes from a handful of stock irrespective of their market cap. Also, the FTSE is full of banks and finance stocks, the DJIA has only three with a weight of less than 10%. Completely different indicators, cannot be compared.
Rolls Royce is a tricky bugger to trade at the moment, anyone know the reason for the recent monumental rise in sp? I had a holding I sold at a loss once the rights issue was announced (sold at 124) which then dropped to just over 100 (good decision at that point) then someone lit the afterburners and its sky rocketted since. Decided it couldn't possibly stay at these highs, all things considered, so bought into 3SRR and subsequently lost 75% value today alone, ffs. So where does RR go from here? Surely down? Considering another punt on 3SRR @ under £2/share (this was >£40/share when RR was trading at its recent low.
Given this history, I feel it would be both easier and safer to look for another share to trade. Feels very much like throwing good money after bad.
What did the world do, to deserve such a great leader of men
Ha yes it's certainly that
As I said previously I have a decent holding in RR, it’s crazy times for sure, I’m expecting a drop soon as it’s doubled in price in less than a week..
I have a figure in mind that’s close and if it hits that then I’m selling a third of my stock, the rest I’ll keep and take up some of the rights and maybe sell the rest, think it’s called swallowing your tail.
There is talk of RR becoming a market leader for small nuclear engines, to effectively take over the jet engine as it’s phased out, long term this could play out well but it has to make it through the short term first..
Apparently the rise is due to people moving out of other investments like premium bonds and buying what appears to be bargain stock, so it all could be false gains, guess we’ll see when the rights are announced.
Interesting thanks for that. Interested to see where it begins again today.
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