Rolls-Royce Rights Issue - Good Idea or Leave Alone?

[pauljdh]

I'll have options on the proposed RR rights issue if it goes ahead and to take all my rights up Ill need to put just under 5K for the privilege.

Anyone have any thoughts on the attractiveness or otherwise of such an offer?

I'm close enough to the Company to know that they are technically very strong but have been hammered by mainly COVID effects on aerospace (Trent 1000 issues didnt help I admit) but if they execute the transformation theyre in the middle of properly and structure financially properly then it may be worth a go?

[Mr Pointy]

Do you think you'll see a 7-8% return every year? If not, there are plenty of funds that will give you that (& more) which might be a better home for £5k.

[Gnevans]

Without offering advice:
If you don’t buy the rights you will be heavily diluted by the 10 for 3 offer.
Equally they can still go down further.
Your choice.
Read the Sunday papers for their thoughts...

[DonkeyApple]

What percentage rate of your portfolio is currently RR?
What percentage of your free cash is currently £5k?
How much of your employment income is derived from the same sector as RR?
What has changed about your current employment prospects?
What has changed about your future earning prospects?
Is the security of your pension linked to the sector?
How leveraged are you to your home.
What income shortfall would there be if you changed industries?

Those are the sort of questions you need to answer in order to get a basic idea of the real risk you are taking.

Then there is the company itself to look at.

How is it going to restructure?
Where is it going to source growth going forward?
How is it placed to battle its competitors?
Does it have enough cash after the issue to carry on for years at the current levels of business?

[anonymous-user]

Motley Fool may have an odd name but it's a useful resource.

Their view, "Overall, the rights issue will mean the Rolls-Royce share price will fall. Yet I think the share price will fall even without the rights issue, due to poor fundamentals, so would stay clear of investing."
https://www.fool.co.uk/investing/2020/10/02/rolls-...

[fishseller]

Mr Pointy said:

Do you think you'll see a 7-8% return every year? If not, there are plenty of funds that will give you that (& more) which might be a better home for £5k.

Any pointers Mr pointy ?

[Mr Pointy]

fishseller said:

Mr Pointy said:

Do you think you'll see a 7-8% return every year? If not, there are plenty of funds that will give you that (& more) which might be a better home for £5k.

Any pointers Mr Pointy ?

I'm no expert but Fundsmith (18.2% annualised), some bits of Lindsell Train, IM OGG is 7.81% over 10 years, IM PHE is 28% annualised over 10 years (synthesised result). Even Vanguard LS 80 has put on 60% over five years. There are any number of funds likely to perform better than RR over the next few years, which is a shame as it's a really important company for the UK.

Sticking £5k in an individual company at the moment just because they are short of cash seems to me to be closer to gambling than investing.

[BlackG7R]

Again no expert analysis here, just my personal feeling.

As brilliant as their product is, and as much as I want to see RR survive and do well, they just seem to have been struggling for decades. First signs of recession their name always seems to be first to pop up on the news for making redundancies, and struggling for cash / orders.

Personally I can't help thinking there are better places to put £5k, but I could be wrong.

Edited by BlackG7R on Monday 5th October 18:08

[anonymous-user]

BlackG7R said:

I want to see RR survive...

Yes, and they will. However, whether shareholders will enjoy the ride is a different question.

Things which are fundamentally useful like the Channel Tunnel (or RR jet engines) tend to to survive through thick and thin - which sometimes means more than one financial collapse.

[Mr Pointy]

anonymous said:

[redacted]

Pretty much the same position as me - I have 350 shares which are not worth selling & will be worth even less if they get diluted. I'll buy the issue for £371 & just park it as a recovery stock but I wouldn't put £5k into it.

[AlasdairMc]

Has anyone else been watching the share price recently? It seems to be an unsustainable growth rate, up 26% today!

[vulture1]

Yep. My granite 3x short share is all but wiped out however it will come flying back after the sell off past the registration date. However my granite 3x long share is nearly coveting both so it will be sold off a few days before the registration date before the sell off. That is the theory anyway.

[14]

I’ve got 725 shares which are down 40%. I’m not sure wether I want more shares being created or not.

[skinnyman]

AlasdairMc said:

Has anyone else been watching the share price recently? It seems to be an unsustainable growth rate, up 26% today!

Lows of £1.01 on Friday, to £1.95 today, 100% growth in a FTSE100 company within 6 days, it's mental, I think it'll carry on up tomorrow as well.

Still, makes the 32p rights issue much more attractive

[faysmax]

By which date do I need to keep my RR shares in order to be eligible for this rights issue offer? I'm waiting for the SP to breakeven then I'm thinking of selling all or some of them.

[Simpo Two]

What has caused a 100% gain in a week, the rights issue or something else?

[pauljdh]

Closed at 225 today??

[DonkeyApple]

Simpo Two said:

What has caused a 100% gain in a week, the rights issue or something else?

Bounce back after the initial reaction to the announcement of the rights issue as investors digested the news and came to the conclusion that without the rights issue the fair value was going to be zero. Compounding that are two rumours, one that the Govt is about to steer a few £Bn in their direction under Boris’s green revolution. Probably more to do with nuclear power than wind as wind will still require lots of infill solutions all around the UK as there’s no efficient means to store energy yet. And the other rumour is that of the very weak price making them a takeover target.