Tullow Oil Share Discussion Threads

[steve73] 21/3/2017 08:01

francis.. IMO (but please bear in mind that I'm not totally confident in my understanding)

IF you consider the company to be accurately priced at the current c. 200p/# then buying now but keeping enough dry powder to exercise your rights would make perfect sense.

In an ideal world, buying after the 6th at a lower price (c.176p) would make equally good sense.

If you think that the share price could be manipulated by shorters or rights traders, there are valid arguments that you would be better off buying either before (and taking the rights) or after.

What you shouldn't do (IMO) is to buy before and NOT take up your rights, as this will simply be handing on any benefits to the underwriters (perhaps, unless the share price drops below 130).

...and in the meantime if the oil price goes up or down, then this will also influence whether you'd have been better buying now or later.

FWIW, I sold my holding on the day of the announcement, and am looking to either get back in with 2/3rds before the 6th or fully after, depending on where the share price is at the time.... or possibly not at all.

[olieslim] 21/3/2017 07:31

Saudis diversify more away from PoO:

[typo56] 21/3/2017 07:26

No-one can answer that with certainty. Buying after is simpler (no need to deal with rights).

[francis55] 21/3/2017 07:16

So as a potential new investor do I buy today or after 6th April?

[typo56] 21/3/2017 07:09

mike456, I'm not trying to argue that the rights issue will be a success for existing shareholders, I just don't agree in your example that underwriters will sit on a paper profit of 67p per share. That's because if shares trade ex-rights at a premium to the rights price then the rights rump not taken up by holders will get placed, and underwriters won't have to pick them up. The procceds of the placing doesn't profit the underwriters, it pays holders for their lapsed rights. How else would lapsed rights have a value?

It follows that if the rump gets placed there won't be the force of the underwriters driving down the price to 'realise their gain'.

casino444: it appears the blind leading the blind on here !!

Then please enlighten us. Where am I going wrong?

[steve73] 21/3/2017 06:03

I think Casino444 has it spot on with post 748... and as typo56 said earlier yesterday "Only trading opportunities from confusion!"

That's precisely why we smaller holders should be discussing the process here... Unfortunately there are many who seek to profit from this collective ignorance.

[bookbroker] 21/3/2017 05:30

And remember this issue was in discussion weeks ago, the price has been slipping for some time as a result, it's likely current big shareholders were sounded out!

[mike456] 20/3/2017 23:28

You may think I'm blind but at least I've made a profit on TLW

[casino444] 20/3/2017 23:20

it appears the blind leading the blind on here !!

[mike456] 20/3/2017 23:06

I must be looking at it from a different angle to you

In my example two of the original shareholders shares would have fallen by 33p each if the £1.67 ex rights price held up, so getting the 67p would only compensate for their loss in value in the event of a "successful" placing

If the placing wasn't quite so successful then surely there would only be downside for the existing shareholders as the ex rights price would fall below £1.67

Maybe my example wasn't the best but I still believe that there is a higher likelihood of losses for existing shareholders when a rights issue comes along. After all somebody has to bear the costs of the issue and in my experience this is usually the existing shareholders.

[typo56] 20/3/2017 22:26

In my example I was assuming that no existing shareholders took up the offer and the underwriters had to pick them up

If the rights rump can't be placed it means the market has no desire to pay more than the rights price for the shares. Therefore there's no profit in it for underwriters.

In your example, if the share price ends up at £1.67 and the rights are £1.00 then they'll be good demand for the rump placement and the underwriters won't be left with any. The net proceeds of the rump placement will go to the owners of the lapsed rights and will be around £0.67 per rights.

[mike456] 20/3/2017 22:22

In my example I was assuming that no existing shareholders took up the offer and the underwriters had to pick them up

I know it's very simplistic but it's a logic that has served me well in the past

It's also worth mentioning that the underwriting costs would reduce the market value of the company after the issue has gone through which also supports my view that the share price is likely to take a hit.

[typo56] 20/3/2017 22:03

If the share price ends up at £1.67 then the underwriter is sat on a paper profit of 67p per share..

Is that how underwriting works?

I thought there was first an attempt to place the rump. If succeesful the proceeds (less costs) go to the owners of the lapsed rights, not the underwriters. This will be approximately the market price for the fully paid shares, less the rights price.

Don't the underwriters make their money from the fees they charge, for taking on the risk that the rights issue will fail and they'll be forced to pick up the rights at above the market price?

Offering rights at deep discounts is intended to ensure demand, so reducing the risk to underwriters that they'll take a hit. You might assume this would reduce underwriting fees. What do you think?

[mike456] 20/3/2017 20:43

With all the usual posts claiming to have a crystal ball and knowledge of how the share price will move over the coming weeks / months I thought it worth posting the logic underlying why I sold my holding.

Let's take a hypothetical example of a company with 2m shares and a market cap of £4m. i.e. The share price is £2.
The company does a 1:2 rights issue whereby it issues 1m shares for £1 and the issue is fully underwritten.
The theoretical ex rights price is £5m / 3m = £1.67 per share
If the share price ends up at £1.67 then the underwriter is sat on a paper profit of 67p per share and it is a reasonable assumption that the underwriter will try to realise its gain by selling its shares, thereby driving the price down below £1.67.
I'm not saying that the share price would fall as low as the underwritten price but I wouldn't be betting on the share price rising above the theoretical ex rights price in the short term.

Good luck everyone and hope to be buying back at a cheaper price in the coming months.

[888icb] 20/3/2017 19:55

I agree another bell end filtered.

[sux_2bu] 20/3/2017 19:33

potential of a bounce to circa 219p hearts1, N-Joy :)

[hearts1] 20/3/2017 19:25

I'm back in at 197p.

[sux_2bu] 20/3/2017 18:51

Deutsche are not silly. There is a lot of free money to be made. Then they will dump, it's how they roll.

[phillis] 20/3/2017 18:36

Deutsche buying more!

[oilretire] 20/3/2017 18:34

Another bell end for the filter box.........

[oilretire] 20/3/2017 18:24

You're the scam.