National Grid Rights Issue

[Turf]

A third day of selling NG shares. The rights will soon be worthless if this carries on and that's on top of the pain of the shareholding squeeze. I am sorry but I just cant see the Upside of what is beginning to look like a disastrous board action.

Agreed, but we are being held to ransom , we are not forced to take up the rights but compelled too

[IanTHughes]

A third day of selling NG shares. The rights will soon be worthless if this carries on and that's on top of the pain of the shareholding squeeze. I am sorry but I just cant see the Upside of what is beginning to look like a disastrous board action.

Agreed, but we are being held to ransom , we are not forced to take up the rights but compelled too

Can I ask, why is it that you feel "compelled" to take up the Rights Issue? Surely, you could simply not do so!

Enjoy!


Ian.

[EthicsGradient]

Can I ask, why is it that you feel "compelled" to take up the Rights Issue? Surely, you could simply not do so!

Enjoy!


Ian.

Compelled:

Adjective;

1. secured or brought about by force:
Statements made in a compelled interview may not be used in a criminal proceeding.

2. forced or driven to a particular course of action, often by an irresistible internal urge:
I haven't felt so compelled to learn as much as I can about something since my fascination with Slavic folk music!

---

@Turf, don't feel compelled to answer the question, it's a trap.

Neither of those definitions seem to apply here - I highly doubt Turf has an "irresistible internal urge" about this. Letting the rights issue lapse and getting the proceeds from the disposal of the rights is a perfectly reasonable course of action, which I expect many will take.

[tjh290633]

Update: HSBC has now added NGPN to my account. Still no contact or message as to my Options. I've also managed to clear funds available. Hopefully the rest of you waiting for News from your Brokers have also had some movement.

The Halifax group of managers have a link on their front page to Corporate Actions. Do not HSBC have anything similar? That's where you decide your actions.

TJH

[Clariman]

Moderator Message:
Murkslayer has left the site and asked for their account to be deleted. The deletion has been carried out, so no further responses directed towards them are required. Similarly no off topic comments about their departure are required. Thanks, Clariman

[Gerry557]

I think if you take up the rights you are only 15% worse off or 22% worse off if you don't. Assuming the SP remains at this level.

I have done some further calculations in this regard and can definitely assert that the above statement is incorrect.

First of all, the situation as it stands now, assuming an original holding of 1,008 shares:

   Date   | NG Shares | NG Price | NG Value  | Nil Paid | Nil Paid Price | Nil Paid Value | Total Value
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |        0 |           0.00 |           0.00 |  £11,365.20
24-May-24 |     1,008 |   889.40 |  8,965.15 |      294 |         200.00 |         588.00 |   £9,553.15
          |           |          |           |          |                | Profit/Loss    |  -£1,812.05
          |           |          |           |          |                | % +/-          |     -15.94%

Now, assuming unchanged prices, here is the position if one exercises the Rights. One must pay: 645p x 294 = -£1,896.30.

   Date   | NG Shares | NG Price | NG Value  |    Cash     | Total Value
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |       0.00  |  £11,365.20
10-Jun-24 |     1,302 |   889.40 | 11,579.99 |  -1,896.30  |   £9,683.69
          |           |          |           | Profit/Loss |  -£1,681.51
          |           |          |           | % +/-       |     -14.80%

Now, again assuming unchanged prices, here is the position if one does not exercise the Rights. One will receive: 294 x 200p = £588.00.

   Date   | NG Shares | NG Price | NG Value  |    Cash     | Total Value
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |       0.00  |  £11,365.20
10-Jun-24 |     1,008 |   889.40 |  8,965.15 |     588.00  |   £9,553.15
          |           |          |           | Profit/Loss |  -£1,812.05
          |           |          |           | % +/-       |     -15.94%

Exercise Rights - -14.80%
Don’t Exercise Rights - -15.94%

Enjoy!


Ian.

Not disagreeing with what you have calculated but my measure was the change from previous announcement SP to post announcement SP as the OP asked. You are correct there is not much difference in collecting the rights or buying the discounted shares I just assumed buying the discount and them correcting to the then share price.

Be interesting to relook at the figures again after further falls in the SP today.

[IanTHughes]

Not disagreeing with what you have calculated but my measure was the change from previous announcement SP to post announcement SP as the OP asked. You are correct there is not much difference in collecting the rights or buying the discounted shares I just assumed buying the discount and them correcting to the then share price.

Actually, what you posted was:

I think if you take up the rights you are only 15% worse off or 22% worse off if you don't. Assuming the SP remains at this level.

The clear implication being that only Exercising the Rights would prevent one being ”worse off” by a further 7.00%. Very obviously a false statement.

There are people on this site who, not knowing the ins and outs of managing a Rights Issue, might be persuaded by such a statement to Exercise their Rights, in the false belief that such action was the only way that would stop further losses.

I hope you will agree that such a statement, being demonstrably false, must be robustly challenged. Only by presenting a true picture of the options available, can those less experienced in the ins and outs of Rights Issues, at least be furnished with a proper idea of the possible consequences for each option.

I have noticed on this and other threads discussing this Rights Issue that, many of those calculating the value of their holding, ignore entirely the value of the Rights, which must be considered part of the holding, for value purposes. Now it appears that some even forget that cash has a value!

Be interesting to relook at the figures again after further falls in the SP today.

As at the close of business today, 29 May 2024:

Original Holding - -21.75%

Exercise Rights - -20.64%
Don’t Exercise Rights - -21.75%

Enjoy!


Ian

[88V8]

I sold my NG. this morning, and the rights.
Should have done it before - as I commented somewhere, in my limited experience the value of rights tends to fall, and this was another such case.

With Labour upcoming I want out of utilities. Still have Centrica, very much underwater, they are also in the firing line.

Not that it's anything to do with HYP, but I put the capital into NTEA, which is a preference share issued by a utility
Nowt so strange as folk.

V8

Moderator Message:
Post moved from the HYP board where it was off-topic. It appears to be relevant to this discussion. (chas49)

[xyz123]

Hi-1st time poster here so pls bear with me if i am doing something wrong.

1. How does the market for nill paid shares work i.e. i can see these are listed on LSE with ticker (NGPN). For example if one buys these shares for 200p then they need to pay anoter 645p for converting them to real shares so total cost of 845p?

2. Can anyone buy these nil paid rights? I have couple of accounts, one with lloyds where I dont hold any NG shares and they said I cant buy these nill shares unless I own NG already. I have another account with X-O where I do hold NG shares but they want me to do a complex instrument form to allow me to buy these. I understand this is for my own protection but other than price uncertinty with nill paid shares and usual future share price caveats, is there any other risk I should be mindful off?

Thanks for reading my post

[SPURLEY]

Hello why not go back and view from page 8 onwards of the topic on National Grid and you may find a question similar to your own where there may have been an answer . Robert

[EthicsGradient]

Hi-1st time poster here so pls bear with me if i am doing something wrong.

1. How does the market for nill paid shares work i.e. i can see these are listed on LSE with ticker (NGPN). For example if one buys these shares for 200p then they need to pay anoter 645p for converting them to real shares so total cost of 845p?

2. Can anyone buy these nil paid rights? I have couple of accounts, one with lloyds where I dont hold any NG shares and they said I cant buy these nill shares unless I own NG already. I have another account with X-O where I do hold NG shares but they want me to do a complex instrument form to allow me to buy these. I understand this is for my own protection but other than price uncertinty with nill paid shares and usual future share price caveats, is there any other risk I should be mindful off?

Thanks for reading my post

As londoninvestor informed us here, you can't buy nil-paid rights inside an ISA - only get allocated ones due to your existing holding inside the ISA. It's up to platforms after that whether they offer them, I guess.

[IanTHughes]

Hi-1st time poster here so pls bear with me if i am doing something wrong.

1. How does the market for nill paid shares work i.e. i can see these are listed on LSE with ticker (NGPN). For example if one buys these shares for 200p then they need to pay anoter 645p for converting them to real shares so total cost of 845p?

The market for these Rights is the same as any other market. If the demand to buy is larger than the demand to sell, the price will go up, if the demand to sell is larger than the demand to buy, the price will go down.

To the second part of your question, yes. Each Right that you buy, will give you the "right" to buy one of the new shares being issued by the company, at a price of 645p.This is known as "Exercising" the right. Therefore, the total price paid for each share purchased in this way, will be 645p plus whatever you have paid to buy the Right.

2. Can anyone buy these nil paid rights? I have couple of accounts, one with lloyds where I dont hold any NG shares and they said I cant buy these nill shares unless I own NG already. I have another account with X-O where I do hold NG shares but they want me to do a complex instrument form to allow me to buy these. I understand this is for my own protection but other than price uncertinty with nill paid shares and usual future share price caveats, is there any other risk I should be mindful off?

Is the Lloyds account an ISA? Rights are only permitted within an ISA account, if they were received as a result of the account holding the underlying shares. Apart from this ISA account restriction, anyone can enter the Market and buy these Rights, indeed many investors do.

With regards to your other broker and the complex form, they are probably simply obeying the law. This does require them to satisfy themselves that you understand the risks involved in, and appear capable of trading, whatever it is you wish to trade. Trading in Rights, which as far as your broker knows may be what you are intending to do, like trading in Options and other derivatives, is a higher risk activity than Equity trading. Of course, it might simply be overkill and your broker is erring on the side of caution, protecting themselves just in case someone asks them sometime in the future.

If you are simply wanting to buy Rights which you fully intend to Exercise, then yes, in my opinion, the risks are the same as for any other equity purchase you might undertake.

Welcome to the site!

Enjoy!


Ian

[Bouleversee]

So what are the experienced investors on here going to do? Doesn't it come down to whether NG's plans are likely to prove profitable and whether successful companies are likely to get clobbered with tax whoever wins the election because money will be needed to carry out manifesto promises?

I have 605 shares in an ISA which entitles me to 176 new shares at a cost of £1,135.20 and more than enough cash in the ISA to cover the cost. My only query as to the mechanics is that IWeb are saying that if I want to take up the rights in my ISA I must complete an ISA application form to activate the ISA for the current year. Is this rule peculiar to IWeb or general? If there is enough cash in the ISA from dividends, I don't see why I should have to use any of the current year's allowance. I might want to open an ISA elsewhere and I don't think the Conservative plan to permit any number of ISAs got off the ground, did it? I've got so many losses in my p/f I'm more inclined to look for a decent cash ISA or add to one I already have.

I need to take a decision pdq, however.

[londoninvestor]

I don't think the Conservative plan to permit any number of ISAs got off the ground, did it?

It did - as of 2024/25, you can open and contribute to as many ISAs as you like in a tax year.

You wouldn't be using any of your allowance though if you aren't adding any new cash to the ISA, so it's not that clear why iWeb would need you to tick that box.

[Bouleversee]

I don't think the Conservative plan to permit any number of ISAs got off the ground, did it?

It did - as of 2024/25, you can open and contribute to as many ISAs as you like in a tax year.

You wouldn't be using any of your allowance though if you aren't adding any new cash to the ISA, so it's not that clear why iWeb would need you to tick that box.

Thanks. It must have been a mistake (out of date paperwork,) because when I phoned them just now to query, I was told about the new rules as mentioned by you and that I didn't need to worry about it. So all I have to do now is make up my mind as to whether to take up or not. I see that the new shares are down 28.52% and I'm even losing 2.84% on my existing holding's purchase cost. I must check how long I've held them'

I wonder who will check whether ISA allowances are exceeded.

[londoninvestor]

I wonder who will check whether ISA allowances are exceeded.

I assume this is essentially the same process that HMRC already had. Even before 2024/25, you could subscribe to multiple ISAs in a tax year (the restriction was "at most one ISA of each type" rather than "at most one ISA"), and providers are required to make an annual report of subscriptions: so there was presumably already a check that the same person didn't have a total subscription of over £20k.

[Bouleversee]

I'm still dithering and hoping to see some comments as regards the advisability of taking up the rights if one has sufficient free cash to do so. Is this likely to prove a good investment or a damp squid? Has this been discussed earlier in the thread?

[EthicsGradient]

I'm still dithering and hoping to see some comments as regards the advisability of taking up the rights if one has sufficient free cash to do so. Is this likely to prove a good investment or a damp squid? Has this been discussed earlier in the thread?

The 2 analyses I've noticed have both had a target price above the current (even allowing for about 10% drop due to the new shares):
https://www.morningstar.com/company-rep ... 0P00007OUT (1040p)
https://www.ii.co.uk/analysis-commentar ... w-ii531810 (1170p)

[IanTHughes]

I'm still dithering and hoping to see some comments as regards the advisability of taking up the rights if one has sufficient free cash to do so. Is this likely to prove a good investment or a damp squid? Has this been discussed earlier in the thread?

Nobody can ”advise” you what to do without knowing full details of your Investment Aims, your attitude to risk, requirements vis a vis capital availability … etc … etc … One would also need to know full details of all your current investments. Without this information all anybody can do is inform as to what they will do for their own portfolio, which may be relevant to your situation, but maybe not.

What I will say is that, at current prices, Exercising the Rights would entail your purchasing 176 shares of National Grid PLC (NG) at a price of 841.05p – 645.00p + value of the right 196.05p. This represents a discount to NG’s current price – 882.40p - of 4.69%. NG have indicated that the initial annual dividend will be 45.30p, making the yield on these new shares 5.39%. The yield on your new holding would be 5.13%.

There are of course no guarantees of future dividends, but NG have committed to increasing the annual payout by at least the value of consumer inflation. In the past NG have shown themselves very capable of doing as promised in this regard.

I have no holding of NG, and therefore no skin in this particular game but, if I did, I would not Exercise these Rights, preferring to invest the extra funds in one of the many higher yields currently available. But of course, that is just me, an income investor. Another investor might do differently.

In other words, it does look like they are offering a fairly attractive return over the next few years, with an increasing dividend that does look sustainabe. But only you can decide if it fits in with your portfolio and your investment strategy.

Enjoy!


Ian.

[Bouleversee]

I'm still dithering and hoping to see some comments as regards the advisability of taking up the rights if one has sufficient free cash to do so. Is this likely to prove a good investment or a damp squid? Has this been discussed earlier in the thread?

The 2 analyses I've noticed have both had a target price above the current (even allowing for about 10% drop due to the new shares):
https://www.morningstar.com/company-rep ... 0P00007OUT (1040p)
https://www.ii.co.uk/analysis-commentar ... w-ii531810 (1170p)

Many thanks, EG. Having read what their plans are, I think I'll go ahead and take up and hold all my rights. The sum involved is not huge and if they are able to accomplish what they are aiming for (which is very commendable) and have got their costings right, they should do reasonably well. I don't mind if the returns are not totally brilliant if they succeed in providing electricity by means which conform to the requirements to achieve the 100% zero emission target. I'm more concerned that my grandchildren should have a good quality of life with a tolerable climate and feel confident in having children themselves than making a few more pounds or even losing some. At least they seem to have sound finances at present and i.m.o. deserve to be supported in their endeavours. Having lost a lot of money by topping up losers such as Carillion, I won't be doing that again, but I think this is somewhat different. Maybe they will faciIitate electric c.h. boilers for properties which are unsuited to air pumps. I just hope they have allowed for the increasing demand caused by so many immigrants.