How to identify good right issues

invest77 · 1 How to identify good right issues Wed Mar 09, 2011 8:00 pm

invest77

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Can someone please enlighten me as to how we could identify good rights issues. Rights issues are a chance to get a stock at a discounted price but why does rights issues prompt negative impact to the share. Does the price get diluted when the rights conversion happen? Thank you in advance.

dinusl · 2 Re: How to identify good right issues Wed Mar 09, 2011 8:33 pm

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invest77 wrote:Can someone please enlighten me as to how we could identify good rights issues. Rights issues are a chance to get a stock at a discounted price but why does rights issues prompt negative impact to the share. Does the price get diluted when the rights conversion happen? Thank you in advance.

It's depend on the company and how is the directors are playing with the stock...Can't tell it exactly this share is going up if there is a right issue or going down.zzzzzzzz Best answer analyze. Very Happy

Fresher · 3 Re: How to identify good right issues Wed Mar 09, 2011 9:08 pm

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well some things that I can say are,
fora rights issue to be attractive, the exercise price must be far less than the current market price of the share. Also, it should not be asking way too much money from the investors.
The reason for raising funds must be for a good move.
And yes, the EPS will surely get diluted since more shares are entering the market but theoretically one will not lose if rights are subscribed.
I do not know how much is valid for CSE Smile

invest77 · 4 Re: How to identify good right issues Wed Mar 09, 2011 9:28 pm

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Sorry if this is an ignorant argument, but since it is 15:1 rights issue wont the share price get diluted alot more than the exercise price of 25. Can some one please tell me how to calculate the Ex right price?

Fresher · 5 Re: How to identify good right issues Wed Mar 09, 2011 9:45 pm

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invest77 wrote:Sorry if this is an ignorant argument, but since it is 15:1 rights issue wont the share price get diluted alot more than the exercise price of 25. Can some one please tell me how to calculate the Ex right price?

no it will not.
if u exercise your rights, your total wealth and the percentage ownership will not be affected.

invest77 · 6 Re: How to identify good right issues Wed Mar 09, 2011 9:56 pm

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Sorry mate NPP, still struggling to understand. The no of share outstanding wil go up by 15 times and the excersice price at 25, I think the ex right price would be something around 25 or just above that. and if the market price comes down the in the future the ex-right price will get more diluted. I mean there are 15 times more shares coming into the market at 25, from the little calculation i do i think it would be around 26-27. Well i might be doing the calculation wrong. Wink

Fresher · 7 Re: How to identify good right issues Wed Mar 09, 2011 10:07 pm

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why did i get the negative rep? pls tell me what's wrong in what I posted?

tubal · 8 Re: How to identify good right issues Wed Mar 09, 2011 10:12 pm

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If LDEV trades at 50 the day before it goes XR, the XR price will be (50+(25*15))/16 = 26.56 - that's cutting it mighty close.

invest77 · 9 Re: How to identify good right issues Wed Mar 09, 2011 10:26 pm

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NPP... not me mate :-)

invest77 · 10 Re: How to identify good right issues Wed Mar 09, 2011 10:32 pm

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@ Tubal, looking at other shares that issued rights recently, I have a feeling LDEV might go to about 40 ( i am telling this based on nothing but speculation). If so this rights issue will be very much less attractive, and realizing this now people would start selling sending the price down more. This is just a senario in my head but could this be possible.

mono · 11 Re: How to identify good right issues Wed Mar 09, 2011 10:47 pm

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basically look for an illiquid share that makes a massive rights issue. 15 to 1 and higher would be preferable.

Now dump 100-200 million rs on the share to send the price into the stratosphere.

but make sure it doesn't collapse, so another 50-60 spare is necessary.

subscribe to many right as you possibly can.

Dump the rights at inflated prices on the long list of supiri investstors that will always line up.

Laugh all the way to the bank

QED

mark · 12 Re: How to identify good right issues Wed Mar 09, 2011 11:26 pm

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mono wrote:basically look for an illiquid share that makes a massive rights issue. 15 to 1 and higher would be preferable.

Now dump 100-200 million rs on the share to send the price into the stratosphere.

but make sure it doesn't collapse, so another 50-60 spare is necessary.

subscribe to many right as you possibly can.

Dump the rights at inflated prices on the long list of supiri investstors that will always line up.

Laugh all the way to the bank

QED

LDEV.............
WAPO................. scratch

tubal · 13 Re: How to identify good right issues Thu Mar 10, 2011 5:40 am

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invest77 wrote:@ Tubal, looking at other shares that issued rights recently, I have a feeling LDEV might go to about 40 ( i am telling this based on nothing but speculation). If so this rights issue will be very much less attractive, and realizing this now people would start selling sending the price down more. This is just a senario in my head but could this be possible.

Yes. What you are saying is very likely. It happened with another Lankem group company LITE. What mono says is also possible (the WAPO effect).

This is what I am going to do: Buy a 1000 shares for fun. Hoping the WAPO effect happens. I will then sell my rights on the market - hoping for another WAPO effect. But first of all I am going to kiss my money goodbye in case it doesn't happen (investors turn out to be smart (yeah fat chance right?))

Rajitha · 14 Re: How to identify good right issues Thu Mar 10, 2011 8:51 am

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tubal wrote:

invest77 wrote:@ Tubal, looking at other shares that issued rights recently, I have a feeling LDEV might go to about 40 ( i am telling this based on nothing but speculation). If so this rights issue will be very much less attractive, and realizing this now people would start selling sending the price down more. This is just a senario in my head but could this be possible.

Yes. What you are saying is very likely. It happened with another Lankem group company LITE. What mono says is also possible (the WAPO effect).

This is what I am going to do: Buy a 1000 shares for fun. Hoping the WAPO effect happens. I will then sell my rights on the market - hoping for another WAPO effect. But first of all I am going to kiss my money goodbye in case it doesn't happen (investors turn out to be smart (yeah fat chance right?))

There is no Wapo effect m8. Rs 25 for 15:1 split if already way highly priced. Did you even think why WAPO went up initially? Reason was people got to have WAPO shares for just Rs 20 a share that was trading around Rs 1000 I think and not just 1 but like 75-2! So even around the time of rights when WAPO prices drop unless it drops by a huge amount people who applied and got shares can sell the rights or mainly convert rights and sell share with huge profits. Rest also thought just get 100 or odd share and apply for crazy amount of rights as additional as its rights are almost like a give away! LDEV rights are way too expensive at rs 25 for a 15-1!

tubal · 15 Re: How to identify good right issues Thu Mar 10, 2011 8:56 am

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Rajitha wrote:

tubal wrote:

invest77 wrote:@ Tubal, looking at other shares that issued rights recently, I have a feeling LDEV might go to about 40 ( i am telling this based on nothing but speculation). If so this rights issue will be very much less attractive, and realizing this now people would start selling sending the price down more. This is just a senario in my head but could this be possible.

Yes. What you are saying is very likely. It happened with another Lankem group company LITE. What mono says is also possible (the WAPO effect).

This is what I am going to do: Buy a 1000 shares for fun. Hoping the WAPO effect happens. I will then sell my rights on the market - hoping for another WAPO effect. But first of all I am going to kiss my money goodbye in case it doesn't happen (investors turn out to be smart (yeah fat chance right?))

There is no Wapo effect m8. Rs 25 for 15:1 split if already way highly priced. Did you even think why WAPO went up initially? Reason was people got to have WAPO shares for just Rs 20 a share that was trading around Rs 1000 I think and not just 1 but like 75-2! So even around the time of rights when WAPO prices drop unless it drops by a huge amount people who applied and got shares can sell the rights or mainly convert rights and sell share with huge profits. Rest also thought just get 100 or odd share and apply for crazy amount of rights as additional as its rights are almost like a give away! LDEV rights are way too expensive at rs 25 for a 15-1!

Rajitha, you maybe right. That's why I specifically said 'I am going to kiss my money goodbye' before trying this gamble