Tullow Oil Share Discussion Threads

[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.

[mreasygoing] 17/3/2017 17:23

130p soon.

[typo56] 17/3/2017 17:19

hidden, back in them distant days when your word was your bond?

[hiddendepths] 17/3/2017 17:18

Fair comment 2jester - I've just given him a few ticks too!

[2jester] 17/3/2017 17:16

Some good (informative) posts there Typo, I note i'm the only one ticking them up though.

Am i surprised?

Well, no. :o)

[phillis] 17/3/2017 17:13

Of course the TERP is calculated on announcement
If you really like TLW then you should be buying more at the current price and take up the rights for those as well

NiceB?
in for a penny in for several more pounds?

[typo56] 17/3/2017 17:11

hiddendepths, I think it's quite normal for rights issue announcements to talk about discounts to a theoretical ex rights price, which assumes the price will stay static until the ex date! I don't know why they do it. All part of the smoke a mirrors to make out holders are being given some special benefit?

You're lucky they gave an ex date (from open 6th April). Often they only give record dates, which aren't of any interest to the ordinary punter.

[hiddendepths] 17/3/2017 17:06

Leeds - interesting debate. I made the same error this morning and Ed 123 pointed it out. I too have been involved in several similar rights issues professionally and even more as an investor and I have never seen the "theoretical ex rights" price used in an RNS in this way. I have only ever heard the term used to describe the technical price AFTER the shares are quoted ex rights, using the closing price of the day before the XR. No wonder we were thrown!

In the timetable at the bottom of the RNS it is absolutely clear when the shares go ex rights and it's not until 5th April!

Frazboy - the share price HAS fallen by the reported amount! It will fall again when they are ex rights! Typo is right that you can either buy the shares now and take up the rights OR you can buy the shares cheaper post rights. Of course there may be fluctuations between now and then but if the market got it right today and does the same on 5th April, then it will make no difference.

Whether this confusion has had an impact on today's share price move, I don't know.

[typo56] 17/3/2017 17:00

But if you like the company, what is the benefit of taking up the rights as opposed to buying the ordinary shares like anyone else? Apart from dealng costs, which are buried beneath the daily noise (e.g. 15% today).

frazboy, the price has changed. Holders today are 15% worse off than they were yesterday.

[frazboy] 17/3/2017 16:41

Ok, but as others have said, they're not ex-rights yet, so the share price has, effectively, not changed.

[leedskier] 17/3/2017 16:37

frazboy I do not say that the Company's shares at their prevailing price represent good value. My comment related to the corporate exercise.

[leedskier] 17/3/2017 16:35

Usually to make money.

[frazboy] 17/3/2017 16:35

Some rough numbers - let's assume the company had zero cash prior to the Rights issue.

Market Cap prior to rights issue announcement:

914*2.37=£2167m

Market Cap post exercise of all rights (assuming it's stays at the same price as now)

(914+466)*2.02=£2790m

But the company now has £630m in cash.

So, basically, the Enterprise Value of the company hasn't changed today.

Leedskier, why do you think they represent good value?