National Grid Rights Issue

[Arborbridge]

Did we run for the exits or panic when the SP dropped 27% from August to October 2022?

Probably not, and I shan't now.

As for the impending incoming government, we've seen it all before and survived - usually better than one expects. One has to be sanguine about these things, or perhaps not invest in single shares.

This too shall pass.

Arb.

[IanTHughes]

Has anyone calculated what Mr Market made of this rights issue? I mean percentage change from your old holding to this new (temporary) combined holding. I imagine it will be negative...

The fall in value has been significant as follows:

Date      | NG Shares | NG Price | NG Value  | Nil Paid | Nil Paid Price | Nil Paid Value | Total Value | FTSE100 
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |        0 |           0.00 |           0.00 |  £11,365.20 | 8,370.33
24-May-24 |     1,008 |   889.40 |  8,965.15 |      294 |         200.00 |         588.00 |   £9,553.15 | 8,317.59
          |           |          |           |          |                | Profit/Loss    |  -£1,812.05 |   -52.74
          |           |          |           |          |                |       +/-    % |     -15.94% |   -0.63% 

National Grid PLC (NG) down around 16% while the FTSE 100 is down less than 1%.

I would say that the market was not that impressed!

Enjoy!


Ian

[Lootman]

Has anyone calculated what Mr Market made of this rights issue? I mean percentage change from your old holding to this new (temporary) combined holding. I imagine it will be negative...

The fall in value has been significant as follows:

Date      | NG Shares | NG Price | NG Value  | Nil Paid | Nil Paid Price | Nil Paid Value | Total Value | FTSE100 
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |        0 |           0.00 |           0.00 |  £11,365.20 | 8,370.33
24-May-24 |     1,008 |   889.40 |  8,965.15 |      294 |         200.00 |         588.00 |   £9,553.15 | 8,317.59
          |           |          |           |          |                | Profit/Loss    |  -£1,812.05 |   -52.74
          |           |          |           |          |                |       +/-    % |     -15.94% |   -0.63% 

National Grid PLC (NG) down around 16% while the FTSE 100 is down less than 1%.

I would say that the market is not that impressed!

Are the markets ever impressed with rights issues? Typically it is a form of secondary financing that is done from a position of weakness rather than strength.

And the rights have to be issued at a "discount" to entice people to exercise them. And I put the word discount there in quotes because it is a bit of a con. The share price of the underlying always drops as a consequence. So there is no free lunch here. Effectively you have to pay more to maintain your relative holding. Let the rights lapse and you are diluted.

[MrFoolish]

I certainly don't understand why they've transitioned from paying good dividends to a rights issue which is a call for cash. These two things seem to be polar opposites. Do they have excess cash or a deficit of cash?

[Lootman]

I certainly don't understand why they've transitioned from paying good dividends to a rights issue which is a call for cash. These two things seem to be polar opposites. Do they have excess cash or a deficit of cash?

The "good" reason to have a rights issue is to fund an acquisition that is accretive. Melrose used to do this from time to time and it generally worked out, you getting your money back via a special dividend.

But often it is the result of having insufficient cash. As such it is rather like borrowing to maintain a dividend - not a viable long-term strategy.

I almost always sell my rights, or even sell the entire holding, as a protest. Rights issues are not even allowed on the US market.

[IanTHughes]

The fall in value has been significant as follows:

Date      | NG Shares | NG Price | NG Value  | Nil Paid | Nil Paid Price | Nil Paid Value | Total Value | FTSE100 
22-May-24 |     1,008 | 1,127.50 | 11,365.20 |        0 |           0.00 |           0.00 |  £11,365.20 | 8,370.33
24-May-24 |     1,008 |   889.40 |  8,965.15 |      294 |         200.00 |         588.00 |   £9,553.15 | 8,317.59
          |           |          |           |          |                | Profit/Loss    |  -£1,812.05 |   -52.74
          |           |          |           |          |                |       +/-    % |     -15.94% |   -0.63% 

National Grid PLC (NG) down around 16% while the FTSE 100 is down less than 1%.

I would say that the market is not that impressed!

Are the markets ever impressed with rights issues? Typically it is a form of secondary financing that is done from a position of weakness rather than strength.

And the rights have to be issued at a "discount" to entice people to exercise them. And I put the word discount there in quotes because it is a bit of a con. The share price of the underlying always drops as a consequence. So there is no free lunch here. Effectively you have to pay more to maintain your relative holding. Let the rights lapse and you are diluted.

All very true.

The only thing I would add is that, Selling/Lapsing the Rights does create a Return of Capital. Also, how significant is "dilution" of one's holding?

Enjoy!


Ian

[EthicsGradient]

Our math differs

I didn't know the price before the rights issue, so I used this which maybe wrong...

https://www.proactiveinvestors.co.uk/co ... 48265.html

The issue is being priced at 645p, a near 40% discount to last night’s close suggesting it must have been a struggle to persuade investors to stump up the cash, even though it is fully underwritten.

£6.45 = circa 60%, thus 100% ie the price before the rights issue was £10.75 according to them

Then I went rather specific I hold 2217 of them and have been given 646. They are valued in my account currently at £17,090.38 (770.8787p ) and £1,242.59 (192.3514p) respectively for a combined value of £18332.97 at £10.75 per share before the issue, they were worth £23832.75 for a loss of £5499.78. 1% of 23832.75 = 238.32. £5499.78/238.78 gives 23%

Ouch.

Those prices don't look right - the 889.4p that both IanTHughes and I used matches the price at https://www.londonstockexchange.com/sto ... mpany-page , and 770.8787p looks far lower than it's been at any time. The 200p for the nil-paid shares also matches https://www.londonstockexchange.com/sto ... mpany-page - 192.3514p isn't so far off, but still looks a bit low. The 1127.5p figure is what the National Grid has been using as the pre-announcement price in the documentation.

You could use the prices that the LSE pages showed shortly before trading closed (the prices outside proper trading hours can sometimes be a little wonky), which were more like 897.4p and 212p, which would be roughly a 15% loss.

[Gerry557]

Has anyone calculated what Mr Market made of this rights issue? I mean percentage change from your old holding to this new (temporary) combined holding. I imagine it will be negative...

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.

Mr Market hammered it so I don't think it liked it one bit. I'm still unsure of the need to do what they did. They must have had a range of even worse options before opting for this one. They haven't done the shareholders any favors and depending on personal circumstances, especially for private investors might be causing harm.

Tight timescales, you might be on holiday and miss the announcement. You might have already filled your ISA or you just don't have the capital available at short notice.

I've already seen some calls for a head to roll because of this. I wonder if this will get louder once more people realise. I assume the large shareholders were spoken to to gauge feelings.

[Golam]

Useful metrics and summary on Morningstar. https://www.morningstar.co.uk/uk/news/2 ... oubts.aspx

It helped me make a decision, that is, to take up the rights !

[IanTHughes]

Has anyone calculated what Mr Market made of this rights issue? I mean percentage change from your old holding to this new (temporary) combined holding. I imagine it will be negative...

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.

Not quite correct. If one decides not to exercise the Rights, their value will be added to your cash balance. If one assumes prices remain at this level, one would be 15% worse off if the Rights are not exercised, with cash being taken in their place. If the Rights are exercised, some of one's shares will have been bought at the lower price, making the percentage loss on the holding smaller, but not by an appreciable amount.

Mr Market hammered it so I don't think it liked it one bi I'm still unsure of the need to do what they did. They must have had a range of even worse options before opting for this one. They haven't done the shareholders any favors and depending on personal circumstances, especially for private investors might be causing harm.

I suspect that they were obliged by their financiers from whom they are raising the rest of the £60 Billion, to increase the Share Capital. So the only decision to be made was whether to offer these extra shares only to a select cabal of Institutional Investors, or open it up to all Shareholders - a Rights Issue. A Rights Issue requires underwriters, who will of course want their pound of flesh.

Tight timescales, you might be on holiday and miss the announcement. You might have already filled your ISA or you just don't have the capital available at short notice.

Again, this affects small retail shareholders, but big institutional Investors will not have such problems.

I've already seen some calls for a head to roll because of this. I wonder if this will get louder once more people realise. I assume the large shareholders were spoken to to gauge feelings.

Unfortunately, if one wants to buy shares in a market, one is playing with the big boys!

Enjoy!


Ian

[EthicsGradient]

Useful metrics and summary on Morningstar. https://www.morningstar.co.uk/uk/news/2 ... oubts.aspx

It helped me make a decision, that is, to take up the rights !

I think that 1040p "Fair Value Estimate" in the article is for the price before it went ex-rights (the article's timestamp is "24 May, 2024 | 12:29AM", though it does include a chart which went on into Friday morning trading, after the ex-rights drop). Tancrede Fulop's (great name ...) article here is dated May 23rd:

We maintain our GBX 1,040 fair value estimate after National Grid released fiscal 2024 results that were in line with company-compiled consensus and a new 5-year strategic plan calling for a massive step-up in investments to be funded by a GBP 7 billion rights issue and noncore asset disposals. The firm will pay a GBX 58.5 dividend in fiscal 2024, 5.6% above last year. ...

https://www.morningstar.com/company-rep ... 0P00007OUT

So that would be a little above the Thursday range (1034 to 990). Ex-rights, I think that would be about 925p. So a little above the current 889 or 897. Just in case you were taking the 1040p as ex-rights.

[IanTHughes]

Useful metrics and summary on Morningstar. https://www.morningstar.co.uk/uk/news/2 ... oubts.aspx

It helped me make a decision, that is, to take up the rights !

I think that 1040p "Fair Value Estimate" in the article is for the price before it went ex-rights (the article's timestamp is "24 May, 2024 | 12:29AM", though it does include a chart which went on into Friday morning trading, after the ex-rights drop). Tancrede Fulop's (great name ...) article here is dated May 23rd:

We maintain our GBX 1,040 fair value estimate after National Grid released fiscal 2024 results that were in line with company-compiled consensus and a new 5-year strategic plan calling for a massive step-up in investments to be funded by a GBP 7 billion rights issue and noncore asset disposals. The firm will pay a GBX 58.5 dividend in fiscal 2024, 5.6% above last year. ...

https://www.morningstar.com/company-rep ... 0P00007OUT

So that would be a little above the Thursday range (1034 to 990). Ex-rights, I think that would be about 925p. So a little above the current 889 or 897. Just in case you were taking the 1040p as ex-rights.

"Fair Value" is simply someone's idea of what a share should be worth, an opinion, but not necessarily what the Market is currently prepared to pay. "Actual Value" is the price the Market is willing to pay. For the current value, I selected 889.40p as the current price for National Grid (NG), because that was the price assigned by the Market at the close of business on 24 May 2024 - last Friday. The Market is not currently prepared to pay 925p, which cannot therefore be considered for calculation of the "Actual Value".

Enjoy!


Ian.

[IanTHughes]

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.

[BobGe]

Not sure if the calcs have accounted for the existing being cum-div, but not the rights, if that's relevant.

[IanTHughes]

Not sure if the calcs have accounted for the existing being cum-div, but not the rights, if that's relevant.

Surely the value of any dividend attributable to the existing holding, will be the same whether one Exercises the Rights or not? But you are right in that the new shares will not have the dividend attached. Not sure that will make much difference though.

Enjoy!


Ian

[Francus]

I'm still waiting for my Provisional Allotment Letter. Equiniti are unable to email it to me. Only two days left for some of the options and it wasn't in today's post. I find it ridiculous.
Frustrating.

[stockton]

Does anyone know how to find the rights issue prospectus ?

[ayshfm1]

https://www.nationalgrid.com/document/152061/download

That might get you there.

If not click on investing for growth on NG website.

Scroll down and you will see Rights issue, click it

The you can select country

Agree the T&C's

Then you get a whole list of downloads one of which is the prospectus.

[gnawsome]

Does anyone know how to find the rights issue prospectus ?

I too had some difficulty -- ended up getting from LSE NG Publication of prospectus

[dn23s]

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.