GKN Rights issue

[Riftvalley]

I notice that GKN have a 6 for 5 rights issue next week. The price is 50p which is a significant discount over the current prie of 120/125p.

Strikes me that there are some important issues here. Following the rights issue there will be a change in the price of GKN shares. If the price drops towards the 50p level that is bad for current shareholders but could be a great opportunity to sell short. If the price does not drop towards the 50p level then this is a great opportunity for current shareholders to make a swift profit. Cannot envisage tha tthe price will go up - maybe I am wrong here!

I think this a situation well worth discussing as I am sure that events like this will be common in the months to come.

What do the wise people think?

Rift

 

[Technically Fundamental]

Short

 

[foredog]

6 for 5 = 6 @50p = 300p
5 @120 = 600p = 11 @900 which gives an ex rights price of (900/11) 81.8

so in theory the nil piad will trade at 32p so you'd have 192p profit if you sold

BUT

the ordinary you'll have lost 38p or 190. so more or less the same.

 

[Technically Fundamental]

Will you even be eligible for the rights issue if you buy the shares right now?

 

[foredog]

If you buy before they go ex-rights then...yes

 

[Technically Fundamental]

Hmmm.

BTW I f*cking hate that dog.

 

[foredog]

I think the feelings kinda mutual.

 

[Technically Fundamental]

All the rigths issues I've ever dealt with have been for people who've held for "x" amount of time so I just assumed thats how thing roll. I dont really deal with shares anymore. Just goes to show its true what they say aboots assumption innit.

To the thread man. Any company offering that kind of rights issue must be temporarily in the sh*t. IMO these share prices will find a bottom/prev top on this rights issue. I'd be checking the chart to find out how far down you think they will go and come up with some scenarios to see if its a good buy.

I'd be looking at buyside volume over the past couple of months and what kind of profit takes the charts are showing. This could be a sexy op for some sort of fund to offload these b*tches in size.