Golden Prospect Precious Metals

[OLTB]

Hi all

For any that hold, the link here http://www.investegate.co.uk/article.as ... 02557H0890 has information that details a potential bonus issue of subscription shares - one subscription share for every two existing ordinary shares. I understand they instigated a similar bonus issue towards the end of 2011.

Cheers, OLTB.

[DiamondEcho]

A very quick skim suggested these are rights to buy at a progressively stepped-up premium to NaV. And that the management believe the: 'Subscription Price reflect the Board's confidence in the Company's medium to long term prospects and its hope that holders of subscription shares would be able to exercise their Subscription Share Rights and acquire ordinary shares on favourable terms in the future.'

So.... you're being invited to buy at over the value because the Board hope the share price will go up in future. I'm clearly missing something here.

[OLTB]

So.... you're being invited to buy at over the value because the Board hope the share price will go up in future. I'm clearly missing something here.

Well, my question was going to lead onto whether most people take up these scrip issues, or if they leave alone. I am aware that not taking up the issue will lead to dilution of shareholding but as DE says, you'd be taking up the rights on an assumption (and the Board's prayers being answered) that the price will go up...

Maybe better places to invest my cash.

Cheers, OLTB.

[DiamondEcho]

Well, my question was going to lead onto whether most people take up these scrip issues, or if they leave alone. I am aware that not taking up the issue will lead to dilution of shareholding but as DE says, you'd be taking up the rights on an assumption (and the Board's prayers being answered) that the price will go up... Maybe better places to invest my cash. Cheers, OLTB.

I'll tell you my experience and understanding of rights issues [FWIW!].
They're usually a single event, to raise cash for a strategic corporate goal [a global expansion, a big take-over etc]. I haven't seen this multi-stage, multi-year proposition before.
They're at a discount to the value of the instrument. Why would you volunteer to pay a premium? [note: That's for stocks, I appreciate this is a derivative that trades at a discount/premium to NaV.]
They quite often occur when the Board have got big/grand plans for some project and need funding. That's your roll of the dice, IME such grand plans are often not great, even if they make it appear as quite compelling. Ie [IMO] you need to be being offered a persuasive discount to even consider it.
Exercising rights imagines that taking them up/growing our holding, suits your goals, but for many the funds might be better invested elsewhere.

I've had 3-4 rights offers in the last say 10-15 years, but I hold a concentrated portfolio. For the first I took it up, it didn't work out well. For the others, per the above reasons, I sold the rights and used the cash for things I preferred to invest in. Trouble is here, your suggested rights to buy at a premium should [theoretically] have no value.

[OLTB]

Thank you DE - that information is really useful for me as a newcomer to the world of ITs.

Cheers, OLTB.

[tjh290633]

I've had 3-4 rights offers in the last say 10-15 years, but I hold a concentrated portfolio. For the first I took it up, it didn't work out well. For the others, per the above reasons, I sold the rights and used the cash for things I preferred to invest in. Trouble is here, your suggested rights to buy at a premium should [theoretically] have no value.

Whether or not I take up a rights issue depends on the standing of the share in my portfolio. If taking up the rights will make me overweight, by which I mean more than 1.5 times the median holding value, then I sell the nil-paid rights in the market. If the share in question has a yield below the market average, then the odds are that I will sell the nil-paid rights and put the money into somehting with a better yield.

Always exceptions, of course. I took up both the LLOY rights issue and the open offer in 2009, because I was convinced that the shares would recover from the lows around 30p. Also in 2009, Taylor Wimpey had an Open Offer at a very low price, so I sold a large part of my holding at a higherf price than that of the offer, and increased my holding by about 25% as a result, for virtually no cost.

TJH