VB article on the proposed ST trust

[Zappa 0]

I think we should both claim "prophetic ability" in view of this thread Zap....

 

At least that would be a claim we could probably substantiate!

[BrahimHemdani 1]

Im not sure about that Rab. Is the forthcoming share issue not just for existing shareholder's ? Would he not have to use a vehicle and be limited in what he can acquire ?

 

BH will be able to clarify

 

My understanding is that it is most likely to be a rights issue and if it is underwritten by Mr King (if he is asked and accepts) then he will only be able to acquire such shares as are not taken up by existing shareholders. I would expect most if not all of the institutions to take up their rights (which will cost them very little in the overall scheme of things) rather than have their holdings diluted. It would also "average down" their price; thus making it easier to get out with a profit at some point. The most likely source of shares therefore for Mr King by his route would be small shareholders who either cannot afford or do not wish to exercise their rights because of the losses they have already suffered and perhaps a fear of losing all their money in the event of admin2 . I have previously estimated this at 10%-15%.

[BrahimHemdani 1]

LOL D'Art! In the absence of a leg-pulling smilie say hello to Sealy the laughing seal

 

 

Don't see the likeness TBH.

[forlanssister 3,114]

My understanding is that it is most likely to be a rights issue and if it is underwritten by Mr King (if he is asked and accepts) then he will only be able to acquire such shares as are not taken up by existing shareholders. I would expect most if not all of the institutions to take up their rights (which will cost them very little in the overall scheme of things) rather than have their holdings diluted. It would also "average down" their price; thus making it easier to get out with a profit at some point. The most likely source of shares therefore for Mr King by his route would be small shareholders who either cannot afford or do not wish to exercise their rights because of the losses they have already suffered and perhaps a fear of losing all their money in the event of admin2 . I have previously estimated this at 10%-15%.

 

I'm not convinced all the institutions will take up their rights.

 

I think there may be movement in some of the larger stakes pre any rights issue.

 

If the new shares are at a deep enough discount I suspect some may sell their rights in the market to pocket a little cash.

 

Not everyone will pound cost average some may bail.

[BrahimHemdani 1]

What i can see happening is the board accepting another loan from an existing share holder.

 

That would echo the Chairman's statement in the Interim Accounts:

 

In particular, recent public comments suggesting season ticket holders divert payment away from the Club has caused a level of uncertainty over the timing and quantum of season ticket cash flowing into the Club, which as with many other football clubs, is Rangers' primary source of income. If this were to happen then there would be a negative impact on short-term cash balances and it is possible that the Club may need to seek alternative additional short term financing

 

This does not rule out a new share issue or issues, indeed in his review Mr Wallace said:

The authority given to the Board at the AGM in December 2013 to enable the Company to allot up to 43,400,000 new ordinary shares of 1p each in the capital of the Company on a pre-emptive basis to existing shareholders has not been exercised to date. In the event that season ticket sales over the forthcoming weeks are materially less than anticipated then the Company may seek to use this pre-emptive authority which can offer a cost effective and efficient method of raising capital.

 

To implement the initial phase of the three year plan set out below, the Board intends to seek shareholder approval in Autumn 2014 for the issue of additional equity pursuant to Section 551 of the Companies Act 2006.

Edited May 1, 2014 by BrahimHemdani

[der Berliner 3,744]

One question is, which of the existing shareholders is willing and able to spend significant amounts of money on these 43,4m shares. Ashley? R&M? Prior? Laxey? (And we have, of course, those 50m of Blue Pitch hanging about ... )

[BrahimHemdani 1]

I'm not convinced all the institutions will take up their rights.

 

I think there may be movement in some of the larger stakes pre any rights issue.

 

If the new shares are at a deep enough discount I suspect some may sell their rights in the market to pocket a little cash.

 

Not everyone will pound cost average some may bail.

 

You may well be correct about the institutions, both of us can only guess at this stage; but it's hard to see any sellers at this level.

 

Just to clarify there is a difference between what I mean by "averaging down" as an investment strategy especially in a 1 for 1 rights issue (more likely 2 for 3 but this is an easier example) and pound cost averaging.

 

In such a rights issue if an investor takes up all their rights then their average price would be half the total price. So if investors bought at 70p and 20p; their average price is 45p and they will make a profit on their overall holding if the price rises and they subsequently sell at anything above 45p; despite having bought some shares at 70p.

 

However if I spend £100 on shares at 70p; £100 on shares at 35p; and £100 on shares at 52.5p (the average price of the two previous purchases) ; my average price is not 52.5p; because I bought 142.8, 285.7 & 190.5 shares respectively, a total of 619; so the average price of my shares is £300/619 = 48.5p. If I had bought all my shares at 52.5p I would only have 571. In other words the theory of pound cost averaging dictates that the average price of shares bought over a period of time is less than the average price of those shares.

[forlanssister 3,114]

You may well be correct about the institutions, both of us can only guess at this stage; but it's hard to see any sellers at this level.

 

Just to clarify there is a difference between what I mean by "averaging down" as an investment strategy especially in a 1 for 1 rights issue (more likely 2 for 3 but this is an easier example) and pound cost averaging.

 

In such a rights issue if an investor takes up all their rights then their average price would be half the total price. So if investors bought at 70p and 20p; their average price is 45p and they will make a profit on their overall holding if the price rises and they subsequently sell at anything above 45p; despite having bought some shares at 70p.

 

However if I spend £100 on shares at 70p; £100 on shares at 35p; and £100 on shares at 52.5p (the average price of the two previous purchases) ; my average price is not 52.5p; because I bought 142.8, 285.7 & 190.5 shares respectively, a total of 619; so the average price of my shares is £300/619 = 48.5p. If I had bought all my shares at 52.5p I would only have 571. In other words the theory of pound cost averaging dictates that the average price of shares bought over a period of time is less than the average price of those shares.

 

Six and two threes.

 

Played the markets for years till I royally f*&ked up.....

[BrahimHemdani 1]

One question is, which of the existing shareholders is willing and able to spend significant amounts of money on these 43,4m shares. Ashley? R&M? Prior? Laxey? (And we have, of course, those 50m of Blue Pitch hanging about ... )

 

Well, taking R&M as an example, if it's 2 for 3 at say 25p (but more likely 20p now) then all you are talking about is under £800,000 spread across two funds with almost £600m between them, so it's almost a drop in the bucket.

 

When considering what such an institution might do it also worth bearing in mind that the investment objective of the R&M UK Equity Long Term Recovery Fund, for example is to achieve capital growth. In seeking to achieve the objective the portfolio will primarily consist of UK equities that meet the manager’s recovery criteria of a turnaround in company profitability over the longer term. Similarly the investment objective of the R&M UK Equity High Alpha Fund is to outperform the FTSE All-Share Index by 3% per annum (net of fees) over rolling three year periods. .

 

Of course the likes of Laxey and others may have a different perspective but I doubt if any institution went into this thinking they would make a profit in less than 3 years.

[BrahimHemdani 1]

Six and two threes.

 

Played the markets for years till I royally f*&ked up.....

 

With respect, it's not really.

 

"Averaging down" is a theory that relies on occasional purchases at lower prices than the first price. Thta is what I meant in this case.

 

"Pound cost averaging" is a mathematical truism. The theory demonstrates that if you buy shares on a regular basis, you will buy more than if you bought all the shares at the average price over the period, regardless of the fact that you will buy some at a higher price and some at a lower price. It is most commonly used to describe the advantage of buying shares through a monthly savings scheme rather than in a one off lump sum.