Melrose Industries Share Discussion Threads

[meanwhile] 13/3/2020 19:53

Not even worth a comment.

[meanwhile] 13/3/2020 17:56

getting,

I'm ready to give up with you.
I will have one last try.

An investor buys 100 MRO shares at 240p in 2015. A 12 for 1 rights issue at 95p is announced in 2016 to buy Nortek. His 100 shares rise to £8 each on the news. He sells 60 of these, raising £480, to buy the rights on the 40 he still holds, that is 480 (12x40) new shares at 95p. He has a little cash residue of £24 which he banks.
When the new shares open, the MRO price is around 150p but 3 months later has climbed to £2.

At this point he has 520 MRO shares value £1040 + £24 cash. Now to my mind he's made good money. He's lost a little on the 40 old shares he still holds but he's made a lot on the 60 he sold at £8 and on the 480 rights shares, now £2.

This is all fairly straightforward.

Sadly, You've driven me to reveal your true class, in your post of 7th January.

gettingrichslow
7 Jan '20 - 08:49 - 15237 of 16811 Burford
Just bought another £60k of these at 753-755. Bargain of the century.

[gettingrichslow] 13/3/2020 17:25

Meanwhile, your post again reveals you don’t understand the mechanics of rights issues. The price you paid for the original share is completely irrelevant. Secondly, the fact that the share price rose significantly during and after the rights issue isn’t because of the rights issue itself. You seem to think that rights issues offer ‘free money’ to existing holders and that simply isn’t true. I believe that the reason you mistakenly think this is because of the use of the words ‘discounted price’ in rights issues which you seem to equate to a discount that might be offered by Tesco’s when you buy 6 or more bottles of wine! It’s a common misconception as you’ll see if you look at the RPC thread where I, and others, corrected numerous posters who then admitted they had misunderstood the terms of the rights issue. If you go on Investopedia you’ll see a whole article about this: 1. company offers ‘discounted217; shares in a rights issue; 2. Uninformed investors say ‘hey, it’s my lucky day, I’m getting something for nothing’, clearly they don’t think ‘errr...so who’s money am I getting for nothing’!!!
You’ll thank me later when you realise the dilution has actually hit you more than you realised, but if you want to stay ignorant that’s up to you - ignorance is bliss they say! 🤔

[essentialinvestor] 13/3/2020 16:59

M,you are too kind!. Hope you are keeping well.

I'm in PRU at 10.66 average - ouch!.

[minerve 2] 13/3/2020 16:55

MEANWHILE

Getting isn't still obsessed with Burford is he?

Almost as bad as me with the outsourcers! 😜

[minerve 2] 13/3/2020 16:53

Essential

"Don't laugh, I've bought a very small amount."

I'm sure, knowing you, it is a very astute purchase. ;)

Good luck with that. :)

[meanwhile] 13/3/2020 16:41

getting,

Now you be careful with your response to me on the Rights Issue. Please don't annoy me with your continued lack of understanding. If you do, I might have to highlight your much-boasted-about 'Purchase of the century' last month on Burford at 753p.

In my case, maybe Barclayshare made a huge arithmetical error in my account.
I hope they don't find it out.

[essentialinvestor] 13/3/2020 16:30

Don't laugh, I've bought a very small amount.

[minerve 2] 13/3/2020 16:28

Still plenty of pain and fear to come IMHO, Covid-19, Chinese, Russkies, Arabs and Yanks have an awful lot to answer for.




Absolutely. Completely agree.

Hold fast folks.

[meanwhile] 13/3/2020 16:26

getting,
as I've said before, you don't understand what happened in 2016.

A holder of MRO shares before the announcement of Nortek, could, on the announcement, sell a proportion of his shares, at 550-850p, (the price the existing shares rose to in the days following the announcement), to finance the purchase of the 12 for 1 new shares at 95p. So a holder who took up the full rights in this way had one old share (which in my case was bought at around 240p) and 12 new shares bought at 95p.
The old share was indeed heavily diluted by the new but if you held it prior to the announcement, then you probably paid around £2 and the dilution was fairly minimal.

This is the only explanation I can find for the £350,000 increase in the Barclayshare valuation of my MRO shareholding following the issue of the new shares and the first few month's trading, when they topped £2.
I couldn't dispute it if I wanted to because it's there in black & white.

[yertiz] 13/3/2020 13:30

This dead cat bounced fairly high this morning but is gliding gently back to earth. Still plenty of pain and fear to come IMHO, Covid-19, Chinese, Russkies, Arabs and Yanks have an awful lot to answer for. Agree with you Meanwhile on our exit from the EU madhouse. There's a disaster movie waiting to be made.

[gettingrichslow] 13/3/2020 13:13

Meanwhile, you got the new shares at 95p but to compare that number against today’s share price isn’t a like for like comparison, because you haven’t factored in the value dilution on the existing shares you held as a result of the increase in the overall number of shares following the rights issue. I’ve given you a worked example before because I know you find the maths a little tricky, but I’m happy to give you another worked example if that helps?

[sliotar] 13/3/2020 12:23

US Futures looking strong. Turning point or another bounce for the dead cat. Same old question for a high Beta stock like MRO -- Sell into strength or buy on further weakness?

[meanwhile] 13/3/2020 10:56

Yertiz,

Thanks for your concern regarding my wallet. I have heard nothing of Minerve2 but of course he held other than MRO.
I am almost out of MRO now, just kept a few, having sold well off the top but still in good profit. Don't forget that long term holders who took up the 12 for 1 Rights Issue to buy Nortek in 2016 got their new shares at 95p.

[meanwhile] 13/3/2020 10:40

Thank The Lord we have left the EU.

Italy & Spain heading rapidly for bankruptcy and who knows else to follow, maybe the whole lot.
At least we won't go down with it, although of course, we may go down on our own.

Utter turmoil may result. The entire founding principles, like free movement, of the EU will be questioned and challenged, together with all the ridiculous terms and regulation of goods.
They may ask themselves, for example, why they regulate the shape and colour of an imported banana but have overlooked the Chinese tourist coming to the EU after just having a meal of hog-nosed bat's wing soup for his breakfast before flying here.

[jackdaw4243] 13/3/2020 09:14

If you have a portfolio that has Shell, BT, Barc, Costain, Bur, NMC and MRO there is not much to talk about, not to mention RR and Lloyds.

[gettingrichslow] 13/3/2020 00:06

All, these are truly extraordinary times and considering the price movements I’m amazed there hasn’t been more discussion on here. I too think MRO has a brilliant management team but as I said a couple of weeks ago that’s not enough when your end markets are getting crushed. There is no sign of an end to that as far as I can see. As Yertiz points out, we’ve not heard from a lot of regular posters and that concerns me because I hope they haven’t taken unsustainable losses in these current markets. B+, Losos and others - are you out there?

[essentialinvestor] 12/3/2020 19:29

If you want to look at potential downsides for MRO...their buy, build/improve and sell models, depends on someone buying. A bear market compresses multiples, as we've seen today!. There is also the net debt, which remains arguably pretty chunky.
Finally, the sectors MRO operates in are cyclical, all be it with longer
secular growth drivers.

Plus points are a first class management team and a model that has operated through multiple economic and market cycles. Including the 08/9 financial crisis, All imv Only.

[yertiz] 12/3/2020 18:33

I said some weeks ago the market was 'toppy'. Not a scientific view I admit but true all the same. Some ridiculed my comment, and some thought having stop losses in place was for mug punters. Actually, thinking about it, it was the same 'big shot' who commented, now very conspicuous by his very absence... Like you I sold out before the big falls, preserving my sanity and profits.
Too soon to buy back yet, but there will come a point where the bottom is reached and sense returns.

[tournesol] 12/3/2020 17:19

I'm sorry but I can't agree that it's all madness.

Warren Buffett said that his preferred indicator of the market being over/under priced is the ratio of the total market cap for all listed US companies compared against the total GDP. (I think this can be compared with the idea of the P/E ratio for individual companies.) Over the long term - and in Buffett's thought process, long term means decades long - the average value of this Buffett indicator tends towards a value of 1. When the market gets overheated the value can rise to 1.35 and above. before the current crash started, it had reached 1.47.

So that means the market - or at least the US market - was looking very over-valued. That would not, of itself, trigger a crash, over-valuation can persist for years. But it is clearly an unstable situation, an accident waiting to happen.

And hey presto we have two accidents happening at the same time. We have the Covid-19 and we have the oil price crash. Those two co-incident events had an impact on the already unstable market and started a landslide. And once that starts it gets a momentum all of its own. It won't stop until the Buffett indicator hits the bottom of its historic range.

Before dismissing this as baloney, take a look at the historic chart of the Buffett Indicator. It predicted the crash of 2000-2001, the crash of 2008 and the current crash. That's a hat-trick of successful predictions. I find that pretty convincing. It helped me to exit the market a few weeks ago which was fortunate.

I will make it part of my investing toolkit in future.

[yertiz] 12/3/2020 16:39

A buying opportunity? This market has reverted to madness, fear driven and nonsensical. I do hope Meanwhile has escaped with his wallet looking a little tattered and worn and Minerve has kept away from the razor blades! Might, just might take a little dabble at this ridiculous level....

[gettingrichslow] 10/3/2020 19:25

Essential, I had more shares than Charlotte T! Do I need to do an RNS??