National Grid Rights Issue

[dealtn]

Well it appears that when they started selling them, the price had dropped. Equity markets are not like supermarkets! When you decide you want to sell, you can only do so at a price that a buyer is prepared to accept.

You would appear to be suggesting that an underwriter must accept that, even if unable to achieve in the market what is by definition an historical price, that price has already been fixed in stone, and must be honoured. Should this straight jacket apply to all equity sales, or is it only "Lapsed" rights that should receive this special attention?

I say again, that is not how a “market” works.

Enjoy!


Ian.

Your "historical price" seems irrelevant. There was nothing in the documents saying "we will start selling lapsed rights 2 weeks before they lapse". It seems illogical to expect them to do that - because they'd have no idea of how many they should sell. Indeed, it seems to be you who is suggesting that a price was 'fixed in stone' over those 2 weeks, and that the premium should be based on that, rather than on the market price when the lapsed rights were actually available for sale.

How do you "know" what the market price was for a transaction of that size? Or are you assuming the last marginal price for a smaller trade is sufficient?

[IanTHughes]

Well it appears that when they started selling them, the price had dropped. Equity markets are not like supermarkets! When you decide you want to sell, you can only do so at a price that a buyer is prepared to accept.

You would appear to be suggesting that an underwriter must accept that, even if unable to achieve in the market what is by definition an historical price, that price has already been fixed in stone, and must be honoured. Should this straight jacket apply to all equity sales, or is it only "Lapsed" rights that should receive this special attention?

I say again, that is not how a “market” works.

Your "historical price" seems irrelevant. There was nothing in the documents saying "we will start selling lapsed rights 2 weeks before they lapse". It seems illogical to expect them to do that - because they'd have no idea of how many they should sell. Indeed, it seems to be you who is suggesting that a price was 'fixed in stone' over those 2 weeks, and that the premium should be based on that, rather than on the market price when the lapsed rights were actually available for sale.

I never said any such nonsense! What I was asking was how far back did you want to go in your search for a "correct" price. Any price is "historical", if it was before one attempts to deal. Just to be clear, when I say "historical" I mean "in the past". If I go into the market at 09:00:00, a price quoted at 08:59:59 is "in the past".

When one allows rights to "Lapse", one is asking for one's broker, in fact the underwriters, to sell those rights "at best". For the inexperienced among us, "at best" means that they be sold at whatever is the best price that can be achieved at that point in time, not before that point in time. They are not obliged to honour any price that is "in the past".

I say again, what you are sugggesting is not how a “market” works. Furthermore, if one does not like a free market, whether one understands the phrase or not, one does not have to participate within one.

Enjoy!


Ian.

[EthicsGradient]

Your "historical price" seems irrelevant. There was nothing in the documents saying "we will start selling lapsed rights 2 weeks before they lapse". It seems illogical to expect them to do that - because they'd have no idea of how many they should sell. Indeed, it seems to be you who is suggesting that a price was 'fixed in stone' over those 2 weeks, and that the premium should be based on that, rather than on the market price when the lapsed rights were actually available for sale.

I never said any such nonsense! What I was asking was how far back did you want to go in your search for a "correct" price. Any price is "historical", if it was before one attempts to deal. Just to be clear, when I say "historical" I mean "in the past". If I go into the market at 09:00:00, a price quoted at 08:59:59 is "in the past".

When one allows rights to "Lapse", one is asking for one's broker, in fact the underwriters, to sell those rights "at best". For the inexperienced among us, "at best" means that they be sold at whatever is the best price that can be achieved at that point in time, not before that point in time. They are not obliged to honour any price that is "in the past".

I say again, what you are sugggesting is not how a “market” works. Furthermore, if one does not like a free market, whether one understands the phrase or not, one does not have to participate within one.

Enjoy!


Ian.

You listed prices from 24th May to 7th of June, when talking about what price the lapsed rights, sold from 10th June onwards, should fetch. That's why it's you who is trying to use a historical price for what they should have got, rather than the market price at the time. I was not suggesting going "far back" at all. But you used prices from 2 weeks before the price of the lapsed rights was set as your evidence.

dealtn, the lapsed rights did not have to be sold in one huge deal with just one buyer. They would be sold as the market bore - and the price of the fully-paid shares would vary with the price achieved by the rights. We saw that 865-875p was the fully-paid share price after the rights lapsed.

[IanTHughes]

I never said any such nonsense! What I was asking was how far back did you want to go in your search for a "correct" price. Any price is "historical", if it was before one attempts to deal. Just to be clear, when I say "historical" I mean "in the past". If I go into the market at 09:00:00, a price quoted at 08:59:59 is "in the past".

When one allows rights to "Lapse", one is asking for one's broker, in fact the underwriters, to sell those rights "at best". For the inexperienced among us, "at best" means that they be sold at whatever is the best price that can be achieved at that point in time, not before that point in time. They are not obliged to honour any price that is "in the past".

I say again, what you are sugggesting is not how a “market” works. Furthermore, if one does not like a free market, whether one understands the phrase or not, one does not have to participate within one.

You listed prices from 24th May to 7th of June, when talking about what price the lapsed rights, sold from 10th June onwards, should fetch. That's why it's you who is trying to use a historical price for what they should have got, rather than the market price at the time. I was not suggesting going "far back" at all. But you used prices from 2 weeks before the price of the lapsed rights was set as your evidence.

Complete tosh! What I posted was:

What would be the “correct” price for the "Lapsed" rights?

The answer of course, is whatever the market will bear!

It appears that you do not understand: "What would be the “correct” price for the "Lapsed" rights?". Or is it: "whatever the market will bear", that has you stumped?

I really cannot make it simpler to understand, sorry!

https://www.amazon.co.uk/Investing-Dumm ... d_source=1

Is a fine book to read

dealtn, the lapsed rights did not have to be sold in one huge deal with just one buyer. They would be sold as the market bore - and the price of the fully-paid shares would vary with the price achieved by the rights. We saw that 865-875p was the fully-paid share price after the rights lapsed.

Whoever said that they were looking for one single buyer? Oh dear me!

You do realise that the "market" would still know the overall requirement. Sorry, a silly questiopn, of course you don't!

Enjoy!


Ian.

[EthicsGradient]

You listed prices from 24th May to 7th of June, when talking about what price the lapsed rights, sold from 10th June onwards, should fetch. That's why it's you who is trying to use a historical price for what they should have got, rather than the market price at the time. I was not suggesting going "far back" at all. But you used prices from 2 weeks before the price of the lapsed rights was set as your evidence.

Complete tosh! What I posted was:

What would be the “correct” price for the "Lapsed" rights?

The answer of course, is whatever the market will bear!

You posted the prices here: viewtopic.php?p=670482#p670482

There seems little point in responding to you again until you acknowledge basic reality, as seen in this thread.

[IanTHughes]

Complete tosh! What I posted was:

You posted the prices here: viewtopic.php?p=670482#p670482
There seems little point in responding to you again until you acknowledge basic reality, as seen in this thread.

Once again, complete tosh! What I posted was:

What would be the “correct” price for the "Lapsed" rights?

The answer of course, is whatever the market will bear!

It appears that you do not understand: "What would be the “correct” price for the "Lapsed" rights?". Or is it: "whatever the market will bear", that has you stumped?

As I already explained, I really cannot make it simpler to understand, sorry!

But you are partislly right ....

https://www.amazon.co.uk/Investing-Dumm ... d_source=1

is obviously far too advanced for someone with your investing knowledge and experience.

I am truly sorry to have wasted your time. It is so obvious now that my explanations were also not suitable for someone of your now so obvious investment knowledge and understanding. I will not make such a mistake in the future.

Enjoy!


Ian

[tjh290633]

Complete tosh! What I posted was:

You posted the prices here: viewtopic.php?p=670482#p670482

There seems little point in responding to you again until you acknowledge basic reality, as seen in this thread.

You seem to misunderstand what happens to lapsed rights. After the deadline, the underwriters make them up into fully paid shares and then sell them in the market. They then deduct their costs, the 625p subscription and the balance is distributed pro rata among the holders of the lapsed rights.

What the value of the nil paid rights was prior to the deadline is irrelevant. The only consideration is the price realised for the fully paid shares after that deadline.

TJH

[fisher]

https://www.morningstar.co.uk/uk/news/A ... -rump.aspx

Morningstar 12 June 2024

National Grid PLC - London-based electricity and gas utility company - Says buyers have been found for remaining 97.7 million shares under the GBP7.00 billion rights issue for which valid acceptances were not received at a price of 835 pence per share. Notes this equates to around 9% of the shares issued under the rights issue. Earlier Wednesday, National Grid said it received acceptances from shareholders for 987.4 million new shares, 91% of the total on offer in the 7-for-24 rights issue. The rights issue price was 645p per share, meaning the acceptances are worth GBP6.39 billion.

Current stock price: 874.40 pence

I realise that placing 97.7 million shares may have taken some doing, but only getting 835p for them when the market price was 874.4p suggests a rather poor effort. I let my rights lapse for this rights issue which I don't remember ever having done before. I presumed they would get somewhere a lot nearer to the market price but I was wrong and I've learned an expensive lesson.

[kempiejon]

I realise that placing 97.7 million shares may have taken some doing, but only getting 835p for them when the market price was 874.4p suggests a rather poor effort. I let my rights lapse for this rights issue which I don't remember ever having done before. I presumed they would get somewhere a lot nearer to the market price but I was wrong and I've learned an expensive lesson.

I wondered this, is it always going to be the case? Can you actually make a rule like never lapse. Is the price that far away from would you might have got depending on when your decision to lapse was made? Isn't it just the vagaries of stock market investing, hopefully some you win but not this time? How might tail swallowing have worked out?

[fisher]

I did effectively tail swallow by using my LGEN dividend to buy NG shares for the approximate value that the rights were worth in the market and waiting for the rights to lapse to recover the dividend cash. In previous rights issues I have usually sold enough of my shares to get the cash available for taking up all of the rights. In hindsight, sticking to my usual plan would have worked out better for me.

I don't know if the value for the lapsed rights shares is always circa 5% less than the market price for rights issues, but I doubt it. I think it was possibly the sheer scale of this rights issue that caused the "discrepancy" with possibly a lack of effort by the underwriters to get the best price.

[EthicsGradient]

You posted the prices here: viewtopic.php?p=670482#p670482

There seems little point in responding to you again until you acknowledge basic reality, as seen in this thread.

You seem to misunderstand what happens to lapsed rights. After the deadline, the underwriters make them up into fully paid shares and then sell them in the market. They then deduct their costs, the 625p subscription and the balance is distributed pro rata among the holders of the lapsed rights.

What the value of the nil paid rights was prior to the deadline is irrelevant. The only consideration is the price realised for the fully paid shares after that deadline.

TJH

No, what you describe is what I thought should be happening. After the deadline (10th June), the market price of the fully paid shares was between 865 and 875p. When the subscription (645p, not 625p) is deducted, that got them 220-230p. They paid the holders 190p, which seems unduly tight to me. If it is typical for costs of selling lapsed rights to be 15%, that is worth knowing for the future.

[88V8]

You seem to misunderstand what happens to lapsed rights. After the deadline, the underwriters make them up into fully paid shares and then sell them in the market. They then deduct their costs, the 625p subscription and the balance is distributed pro rata among the holders of the lapsed rights.

No, what you describe is what I thought should be happening. After the deadline (10th June), the market price of the fully paid shares was between 865 and 875p. When the subscription (645p, not 625p) is deducted, that got them 220-230p. They paid the holders 190p, which seems unduly tight to me. If it is typical for costs of selling lapsed rights to be 15%, that is worth knowing for the future.

Well I sold mine for 151p, which as it turned out was pretty much the bottom of the market, so sometimes masterly inaction is better.

V8

[IanTHughes]

https://www.morningstar.co.uk/uk/news/AN_1718213459664574300/in-brief-national-grid-says-buyers-secured-for-rights-issue-rump.aspx

Morningstar 12 June 2024

National Grid PLC - London-based electricity and gas utility company - Says buyers have been found for remaining 97.7 million shares under the GBP7.00 billion rights issue for which valid acceptances were not received at a price of 835 pence per share. Notes this equates to around 9% of the shares issued under the rights issue. Earlier Wednesday, National Grid said it received acceptances from shareholders for 987.4 million new shares, 91% of the total on offer in the 7-for-24 rights issue. The rights issue price was 645p per share, meaning the acceptances are worth GBP6.39 billion.

Current stock price: 874.40 pence

I realise that placing 97.7 million shares may have taken some doing, but only getting 835p for them when the market price was 874.4p suggests a rather poor effort. I let my rights lapse for this rights issue which I don't remember ever having done before. I presumed they would get somewhere a lot nearer to the market price but I was wrong and I've learned an expensive lesson.

The market price is irrelevant. Market Makers are only obliged to offer Buy and Sell prices for small blocks of shares. I am not sure what the maximum size is for National Grid PLC (NG), but if you look at the trades recorded by the London Stock Exchange SETS system, you will not find many transaction over 1,000 shares. Obviously the Underwriters cannot rely on Market Prices for 97.7 Million shares. In order to fill such a sales order, the Underwriters must offer large blocks of shares to large Investors. There will be some competion from a number of possible investors, but a deal will have to be done! In these circumstances, a 4.50% discount from the Market Price for 1,000 shares, is not excesssive in my view,

However, it is true to say thst "Lapsed" rights will most likely never achieve a recompense equal to the share's Market Price MINUS the Exercise Price. If this is a concern, and assuming the percentage required to be paid as a transaction fee is not too onerous, consider selling them before they become "Lapsed". But do not forget, if this Sale is done some time before "Lapsing" occurs, the share price may subsequently rise and create the disappointment of having acted too soon!

Enjoy!


Ian.