Comments on: Prudential Mega Rights Issue

By: CityAnalyst

CityAnalyst — Tue, 25 May 2010 15:59:15 +0000

OK, on ex-date the price of the ordinary shares will adjust and nil paids will be distributed. The trading price of the nil paids plus the call price (104) should represent a discount to the ordinary share. We will have to review the prices on ex-date.

By: CityAnalyst

CityAnalyst — Tue, 25 May 2010 15:45:16 +0000

Hi Mark, apologies for the delay in responding. I shall address this with some additions to the article.

By: Mark O'Shea

Mark O'Shea — Tue, 25 May 2010 15:36:26 +0000

Very interesting point

By: Mark O'Shea

Mark O'Shea — Sun, 23 May 2010 00:03:52 +0000

I’m a bit confused how this prudential rights issue is a discount? I have 6000 pru shares currently trading at just say £5.30 which values them at £31,800. presumably i will therefore be offered 33,000 rights issue shares (6000/2×11) at the price of £1.04 costing me £34320. I therefore presume that i will end up with 6000 original shares plus the 33,000 rights issue shares making 39000 shares intotal. My question is if i add the current value of my 6000 shares (£31,800) to the cost of the rights issue shares (£34,320) i believe my cost will be (forgetting the actual cost of my 6000 shares) will be £66,120. Assuming a terp of say £1.72 my 39,000 shares would be worth £67,000. Therefore i cannot see the 40% discount as theoretically i would only be £880 better off but would have pumped in another £34,320. Am i missing something in my understanding as presumably if i did nothing my 6000 shares would be reduced from £31,800 to £10,320 (6000 x £1.72)? Thanks

By: CityAnalyst

CityAnalyst — Tue, 18 May 2010 00:23:10 +0000

I have added the rights calculation to the main article to that anyone that wants to sell nil paids to take up the remaining rights can easily work out how many to sell.

By: CityAnalyst

CityAnalyst — Tue, 18 May 2010 00:08:37 +0000

Hi Joyce, you should be able to still take advantage of the offer, but you will need to speak with your plan manager. You will be issued nip paid rights, which are like mini-shares in the company. These are tradeable. You can sell some of the nil paid rights and with the money take up (buy/subscribe) the remaining rights. Your plan manager may calculate this for you. As you are not actually investing any additional money into your ISA it does not affect your annual allowance. It is a tricky thing to calculate, but say you own 10000 nil paid rights, it will cost you £10,400.00 to buy them at 104p. If the rights trade at 20p then if you sell 8387 nil paids, you should get £1677.40 (assuming there are no fees). This will allow you to take up 1612 rights (1612*1.04 = £1676.48). This allows you to make the most of the rights issue without spending any money. Essentially you gain 1612 new shares. Of course, this is not shares for nothing as the trading price will drop to compensate, but if the discount to market is good you will be gaining that difference. Alternatively you could just sell the nil paids at have the money added to your ISA, if that is allowed.

By: Joyce

Joyce — Mon, 17 May 2010 23:49:40 +0000

I have a Prudential ISA but have already invested my annual entitlement this year. Does this mean that I can not take advantage of this offer?