Why should I pay 275p per share in HBOS rights issue when I can buy at 270p on the stock market?

Question

Why should I pay 275p per share in HBOS rights issue when I can buy at 270p on the stock market?

Answer 1

If you have a very small number of shares, dealing costs may make it economical to buy the rights issue shares rather than via a stockbroker.

5p x 200 = £10

So if you have less than £470 currently (market value) invested in HBOS, it may be worthwhile.  However, you are probably better off lapsing the rights, and receiving the rights premium if there is one when it occurs.

I believe the price is now £2.75, however most market commentators recommend letting it lapse!

It is a no brainer apparently........

Answer 2

What a strange question, what sort of answer are you hoping to get - yes, go ahead and buy the more expensive ones? You don't have to buy their shares at their prices, the rights issue is to raise collateral for the company and the price has been set and will not change, this is just an easy way for investors to increase their share holding and works for people who find stocks and shares daunting.  Use your stockbroker if you want, no one is forcing you to buy the shares.

Answer 3

Do you believe the post-rights price will rise above 275p? Do you believe that bears are short selling to scare away the nervous holder who came in at a price at a higher level? Yes? Then ,perhaps you should take up your allocation.

Is it possible that the price is down because then the speculators can pick up the unwanted issue without paying any premium?

Answer 4

unfortunately you cannot buy HBOS at 270p in the market. Even if you could (yesterday?) don't forget there is commission and stamp duty to pay but not on taking up the rights. Still a tricky one though, I agree. See http://www.shareworld.co.uk for details of all the banks fundraising details.