Depends on the situation, but if the rights are tradeable and nil paid you should have two positions; one on the stock and a new bet on the rights. When the stock goes ex-, the price should drop directly in proportion to the rights. You should therefore end up (assuming you are long) with a running profit on the nil-paid rights position, which offsets a loss on the stock.
Should or will? (this is IG). What if it is an open offer and the new shares are not tradeable?
Without knowing all the details it's impossible to say. Every one can be different. If the rights aren't tradeable, you'll probably end up with an altered position (change size, price) on the date the rights expire. If you want to close out, they should make you a synthtic cum-rights price or something.
Technically Fundamental
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shares could be non pref, non voting, or dividend only in which case they could be worth 0.0001 p each or something ridiculous
I hadn't thought of that. Could you give more details of a non-pref/non-voting/dividend only rights issue?
I suppose I meant listed rather than tradeable, or as well as. Even if the rights had no value I am assuming you would still say they are tradeable (i.e. listed)
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You should remember that a lot of rich people/funds use shares as a tax efficient long term investment and not just to trade them. They could buy the shares just for capital investment and for the tax efficiency of the dividend income.
Public limited company - Wikipedia, the free encyclopedia
There are many types of shares in between too but they do exactly what they say on the tin.
Public limited company - Wikipedia, the free encyclopedia
There are many types of shares in between too but they do exactly what they say on the tin.
You've gone off track a bit. Let's stick to rights issues. Can you have a non-tradeable rights issue? Frankly I don't thinkso but don't know for certain but found this:
Rights issue
A rights issue is an issue of tradeable nil-paid rights to existing shareholders in proportion to their existing shareholdings entitling the holders of rights to subscribe for new shares or other securities. Subscription is usually for cash and, in the current market, the subscription price is nearly always deeply discounted to the market price.
There are two ways in which companies can undertake rights issues: under the Companies Acts, sometimes called a "statutory rights issue"; or, if the company's shareholders disapply statutory pre-emption rights, on a "non-statutory" basis. In practice, most rights issues by listed companies are undertaken on the non-statutory basis because it confers certain practical flexibilities (including on timetable and treatment of non-UK shareholders and fractional entitlements).
Arrangements are normally made through underwriters for the subscription of new shares not taken up by existing shareholders. In the first instance, underwriters will attempt to sell the rights not taken up through the market. Any new shares that remain unsubscribed will be taken up by the underwriters.
By the way, I have emailed IG and still waiting an answer- lucky only my money and not my life depends on it!
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Technically Fundamental
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That information I posted before was because I thought you see the reason why div only shares exist and why those parties would buy but the nominal shares for a rights issue on non-tradeable shares.
This question is a bit redundant without seeing the details of the rights issue and what kind of shares are being offered.
This question is a bit redundant without seeing the details of the rights issue and what kind of shares are being offered.
Marston's (MARS). But I was asking a general question about rights issues. Not sure why that is redundant.
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I meant insofar as how a rights issue will affect this particular stock.
In regards to rights issues in general I'd presume each different type of rights issue would affect the price in different ways.
In regards to rights issues in general I'd presume each different type of rights issue would affect the price in different ways.
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Looks as though they are ordinary tradeable shares from their statement. The only problem now will be trying to identify whether the new shares are already factored into the price.
http://media.ft.com/cms/0ef9e3d4-5bd1-11de-aea3-00144feabdc0.pdf
http://media.ft.com/cms/0ef9e3d4-5bd1-11de-aea3-00144feabdc0.pdf
Well they will be tradeable, because it is a rights issue! Not too worried about the merits or non-merits of the fund-raising and it seems the institutional holders are mixed (some being quite annoyed). Just really looking for the way it will be treated by IG when it goes Ex. To simplify, if we have shares at 100 that go Ex a 1:1 at 50 the theoretical Ex price will be 75 and let's say the nil paid rights would trade theoretically at 25. As someone else suggested the SB bet would change to 1@75 and 1NNP @25. And then back to 1@100 after 10 days??
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Yeh thats all well and true on paper and I wasnt trying to confuse you. I just thought of someone who had rolls royce shares where the rights issue was div only shares-
but was still an incentive to buy. e.g for long term investors as I mentioned earlier.
AH! Looks they they went Ex on the 7th. so I am talking crap as usual. The old shares have dropped a bit and so has the SB price yet there is a premium on the NNP so have IG done a fiddle? It's tricky because it is only a bet not a derivative. But that means you could sell stock short on the announcement of a rights issue and be guaranteed a profit on the premium of the nil paid??
I know you might think I am going on about this and you have all dropped off to sleep, but 1. I would like to know the answer for the future and 2. I think it is an important question
I know you might think I am going on about this and you have all dropped off to sleep, but 1. I would like to know the answer for the future and 2. I think it is an important question
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