Tullow Oil Share Discussion Threads

[phillis] 18/3/2017 13:28

Well done
If you are an investor for good reasons why not put you spare cash to work

[2jester] 18/3/2017 12:53

Its just your cash that gets diluted to stand still huh?

[phillis] 18/3/2017 12:14

Typo
You do not increase your holding in the Company
You avoid dilution and your share in the company's assets remains as before
:-)

[puzzler2] 18/3/2017 12:08

Sorry for another post re the maths, but, as a non-shareholder, if I bought 49 shares at Friday's close price of say 203p, I could subscribe for rights over 25 shares at 130p, so I end up with 74 shares that cost me 179p. Suppose that I now sold all those shares short at 203p - I've made an instant profit of 24p per share. That says to me that logically, this arbitrage opportunity should cause the share price to now slide until a day or so before 5 April (subject to the market effect of hedge funds closing out their short positions).

[typo56] 18/3/2017 11:14

Or lets go even further, if it was 7 for 49, so 128MM shares at 474p. If everyone took up these rights there would be the same dilution, but in this case it's unlikely anyone would want to?

It may seem unlikely anyone would want to but in fact they're no worse off than fully subscribing to rights which are 'discounted'. That's because the net cost of taking up rights is the rights price PLUS the loss of value in the nil paid shares. The deeper the discount, the more value you forgo in the nil paid shares. It amazes me that intelligent, experienced investors get hoodwinked into thinking they're being given some sort for bargain to reward them for their loyalty and that they'd be mugs not to take them up. By all means take up the rights if you want to increase your holding in the company - just don't do it because you think you're getting a special price.

It's different with an open offer, where there are no tradeable rights and rarely any value if you let them lapse. Then you really are being blackmailed to take up the offer.

[typo56] 18/3/2017 10:56

shujja1, your numbers are wrong, it's 25 for 49 @ 130p, not 25 for 39.

And your timing is wrong. They don't trade ex-rights until 6 April. That means anyone can buy TLW shares up to close on 5 April and qualify for the rights. i.e. buyers of TLW shares at 237p on Thursday have no more to show for their money than buyers of TLW shares at 200p yesterday.

[leedskier] 18/3/2017 06:14

This link provides an explanation of the point I was attempting to make here yesterday evening about the relevance of the TERP and its relevance to the value of the Nil Paid 'vouchers' to be credited to shareholders holding when the shares are deemed to be ex rights, and of the trading volatility of the 'vouchers' during the period between the shares going ex rights and date by which the 'vouchers' have to be exchanged (or sold or deemed to have lapsed) for shares at the discounted price.





Theoretically, the deeper the discount the more valuable the 'vouchers'. Of course much depends on the perception of the going concern status of the company assuming the cash raise is successful, which where the restructuring is fully underwritten, it invariably is.

[steve73] 18/3/2017 01:31

quote..
Typo56 17 Mar '17 - 18:02 - 28674 of 28688
There is nothing novel about referring to the theoretical ex rights price.

But what is the point of referring to a discount to TERP?

If you're a committed TLW investor, willing to subscribe to the rights in full, why does it matter what 'discount' the rights are issued at?
Suppose instead of issuing 467m shares at 130p to raise £607m they'd issued 303.5m shares at 200p.
It would cost investors the same to take up their rights and they'd end up owning the same proportion of the company.
unquote...


Lets take this approach further... What if they'd issued say 256 MM @ 237 to raise the same £607 M, ie. approx 14 for 49? Would anyone take up their rights?
Or lets go even further, if it was 7 for 49, so 128MM shares at 474p. If everyone took up these rights there would be the same dilution, but in this case it's unlikely anyone would want to? And the underwriters certainly wouldn't be interested on this basis.

So the conclusion is that the "deep discount" is solely to ensure that the underwriters will take up any shares that the existing holders chose not to. If everyone takes up their rights the discount make absolutely no difference.

edit.... Oh, I see others have already stated this..

[a13878713] 18/3/2017 01:24

49 not 39 at £237.3 and I had a drink!

[shujja1] 18/3/2017 00:25

Simple Maths

39 old share at £2.37p = £92.43p
25 new shares at £1.30 =£32.50p
total shares 39+25 =64 shares
total cost £125
125/64 = £1.95 per share

so why should this go down its up at the moment

Well done a very smart move . And buying 50% of of the Fild at old price arranged

[typo56] 17/3/2017 21:47

And if you are a holder,you take up your rights

Assuming the rights issue is more successful than RPC then!

[phillis] 17/3/2017 20:25

Why the prolonged debate
It couldn't be more simple/straightforward

And if you are a holder,you take up your rights

[sux_2bu] 17/3/2017 19:28

This is another Afren in the making.

Fastest finger first next week to sell out. Good luck.

[2jester] 17/3/2017 19:10

Shoulda gone to specsavers TBH...

[leedskier] 17/3/2017 19:06

This all very interesting but it is Friday evening. Good luck with your position here.

[typo56] 17/3/2017 18:49

The Nil Paids do not have a value of 130p!
The Nil Paids have a current value of 35p.

I didn't say they did. I said they'd track 130p below the ordinary shares (once they've gone ex-rights of course). And the nil paids don't exist yet!

If underwriters have been shorting, that would suggest they don't think the share price is going to recover much from here, at least, not to the level they shorted at.

[leedskier] 17/3/2017 18:33

The Nil Paids do not have a value of 130p!


The Nil Paids have a current value of 35p.


This is why they are leveraged.

[typo56] 17/3/2017 18:30

It is just a number used to demonstrate the value of the discounted shares offered to those taking-up rights.

Except there's no net value in the 'discounted' shares, because anyone taking them up is sacrificing the value they would have got selling the nil paids (or letting them laspe). The market in the nil-paids is normally pretty efficient and their value will track at close to 130p below the ordinary shares. So what benefit is there to people gain taking up rights over anyone buying ordinary shares, apart from dealing costs (which is daily noise level)?

In reality, I think the 'discount' is determined by the underwriters - the bigger the discount, the harder it was to underwrite? I don't see why the 'discount', big or small, matters to an investor taking up their rights in full. (As I see you've just posted).

[leedskier] 17/3/2017 18:27

Because these rights issues are fully underwritten, the underwriters determine the price at which they are prepared to take the risk. They cover that risk, i.e. the risk of having millions of shares not taken up, by shorting the price. that probably happened today. If when the corporate exercise has ended the investment banks still have shares on the book they will short the share price down until they find buyers for the 'rump' of the shares not taken up.

This is why it is important that the shares are priced to sell. It reduces the investment bank's risk.

[king kong dong] 17/3/2017 18:19

Debt will get you in the end!

[typo56] 17/3/2017 18:02

There is nothing novel about referring to the theoretical ex rights price.

But what is the point of referring to a discount to TERP?

If you're a committed TLW investor, willing to subscribe to the rights in full, why does it matter what 'discount' the rights are issued at? Suppose instead of issuing 467m shares at 130p to raise £607m they'd issued 303.5m shares at 200p. It would cost investors the same to take up their rights and they'd end up owning the same proportion of the company.

[leedskier] 17/3/2017 17:44

There is nothing novel about referring to the theoretical ex rights price. This was contained in XTA's rights issue in 2009 (which some of us did very nicely in).



Rights Issue

The proceeds of the Rights Issue will be used to repay existing debt, including debt drawn under the Group's existing facilities to finance the Proposed Acquisition. As a result, net debt is expected to reduce to approximately $12.6 billion, with gearing (defined as net debt to net debt plus equity) of less than 30%.

The Issue Price of £2.10 per New Share represents a discount of approximately 40% to the theoretical ex-rights price (TERP) of £3.48 per Ordinary Share and a discount of approximately 66% to the Closing Price of £6.23 on 28 January 2009.