Pennon shares rights issue
Discussion
I currently hold 320 Pennon shares in one of my ISAs. The current market price is approx 457p per share. This is a loss to me of around 50% since I bought them, some time ago.
Under the current Pennon Rights Issue I will be entitled to buy 208 new shares at 264p.
Would it make sense to cut my losses by selling 208 shares from my current holding now, and take up my Rights Issue of 208 to replace them?
Or perhaps I should keep the 320 I already have and add the new 208 to my holding, if the long term prospects for Pennon look good.
(I pay £5 per trade).
Alternatively I could ignore the Rights Issue and leave my holding as it is. I have to make a decision by Monday.
Under the current Pennon Rights Issue I will be entitled to buy 208 new shares at 264p.
Would it make sense to cut my losses by selling 208 shares from my current holding now, and take up my Rights Issue of 208 to replace them?
Or perhaps I should keep the 320 I already have and add the new 208 to my holding, if the long term prospects for Pennon look good.
(I pay £5 per trade).
Alternatively I could ignore the Rights Issue and leave my holding as it is. I have to make a decision by Monday.
In short, your options are:
a) Subscribe in full and stump up the cash for the 208 shares. This incurs no dealing fee, and avoids the dilutive effect of the right issue.
b) Sell your rights in the open market (trading at 195p as of today's close; obviously this will move around with the shares themselves). This would incur a dealing fee, and you get diluted, but the cash from selling the rights is yours to do what you want with.
c) Sell enough of your rights in the open market to cover the cost of taking up the remainder, commonly known as "swallowing the tail". So no cash outlay required but still partially dilutive.
d) Do nothing. Then after the subscription period, the underwriters will sell your rights, along with all the other unsubscribed, in a "rump placing" and distribute the proceeds to you accordingly. Take-up of rights issues is typically pretty high (90%+), so providing they've priced it well there probably won't be much left over to sell at this point and you'd get a decent price (although obviously you end up being diluted). Very occasionally the underwriting banks have an absolute howler where they completely misprice it, rights take-up is poor and no one else wants to buy the rump placing, so they end up wearing a big loss.
a) Subscribe in full and stump up the cash for the 208 shares. This incurs no dealing fee, and avoids the dilutive effect of the right issue.
b) Sell your rights in the open market (trading at 195p as of today's close; obviously this will move around with the shares themselves). This would incur a dealing fee, and you get diluted, but the cash from selling the rights is yours to do what you want with.
c) Sell enough of your rights in the open market to cover the cost of taking up the remainder, commonly known as "swallowing the tail". So no cash outlay required but still partially dilutive.
d) Do nothing. Then after the subscription period, the underwriters will sell your rights, along with all the other unsubscribed, in a "rump placing" and distribute the proceeds to you accordingly. Take-up of rights issues is typically pretty high (90%+), so providing they've priced it well there probably won't be much left over to sell at this point and you'd get a decent price (although obviously you end up being diluted). Very occasionally the underwriting banks have an absolute howler where they completely misprice it, rights take-up is poor and no one else wants to buy the rump placing, so they end up wearing a big loss.
Gassing Station | Finance | Top of Page | What's New | My Stuff