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31 May Finweek..Profit -in installments.

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barry_1
Super Contributor
This is a must read.The rest of the heading;- PPC unbundling creates new opportunities in Barloworld installment shares".There are three different companies with installments on this share,but Vic de Klerk feels as i do that Standard Bank is likely to be the most honest in dealing with this issue of the PPC shares on July 6.Quoting again from the last two sentences in the article..."If Barloworld share price rises by 10% to 20 % over the next five months ,there will be a handsome profit of up to a 100%.Of course Standard bank could still work out something to pour cold water onthe investment,but we're watching very closely"
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21 REPLIES 21
barry_1
Super Contributor
Over the last four days between 12 and twenty deals have been done daily in this installment,which shows other traders must think the same.As we all know there are days in which installments don't trade at all.Both Vic de Klerk and myself hold BAWSTA.
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Beep_Beep
Super Contributor
My charts are not triggering on BAW - what would a entry price for you be now barry - I know you are already in
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barry_1
Super Contributor
Heck i dunno for sure,perhaps DCTrader,John,Chartist,Tango or another trader would give u a better answer than me.All i can add is that i intend adding at retrearts in the share price to my holding.
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gumbis
Occasional Contributor
Guys & Dolls, I'm new in this game...anyone who want to hold my hand and show me the ropes ??? I promise I won't bug you unnecessarily.
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Beep_Beep
Super Contributor
Gumbis - I can assure you from personal experince that there is always somebody that will aswer your queries on this forum. And I have been involved in a few. The help i have received has been very beneficial.
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Beep_Beep
Super Contributor
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JohnnyCash
Super Contributor
Well that'll all depend on whether u are a boy or a girl? Do u kiss on a first date?
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Ditzy
Frequent Contributor
promise not to bug you unnecessarily... it's a girl !
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Not applicable
..bwahahahah Ditz..you make me larf..
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Not applicable
We will only know the final terms of the unbundling on the 5th of July according to the SENS announcement released by Barloworld on the 17th of May. Until that date we wont know exactly what the ratios and terms of the deal are likely to be. But given what is currently in the market we would look to handle the unbundling in he same manner as the unbundling of Kumba Iron Ore from Kumba Resource Limited.

Holders of the BAWSTA's will continue to hold their BAWSTA's (with adjusted terms) post the unbundling and will be issued with a new PPC instalment (a PPCSTB to be issued) in the ratio of the unbundling and with a strike price in the ratio of strike price of the BAWSTA's to the closing price of BAW on Friday the 6th of July (the LDT date to participate in the unbundling) . The terms of the BAWSTA's will be adjusted (the strike reduced) so that the net financial position of instalment holders (of the PPSTB's and BAWSTA's) post the unbundling is equivalent to that prior to the unbundling.

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JohnnyCash
Super Contributor
Does not make good sense though! Reason being if it was paid in cash u would be better off because you get 100% of the dividend (regardless of cash or not) but only paid 1/2 of the share price at this stage.
For arguments sake an example based on current ratios available (aware it may change).
1.8555 PPC (after 10/1 split) for each 1 BAW. Value approximately R95 per BAW share.
After distribution BAW will be exdiv around R103 and PPC will be R51.
For BAWSTA after deducting final instalment of R107 u technically have a current market price of minus R4 (of course if BAW trades higher than R107 in July it wont matter
However if an instalment is issued over PPC, by implication it would mean around R25 for last payment and for holders of BAWSTA zero payment upfront. It begs the question that, that would mean losing out on approximately R70 of the dividend/distribution value?
Or will there be a cash payout on BAWSTA?
Or will you be issued the equivalent number of PPC-Instalments that would equal the value of the distribution (which is R95 per BAW share) which will mean that you get almost 4 new PPC-Instalment shares for every 1BAW-instalment?
My take on it is that it should be treated exactly the same as if it was a cash distribution. To subsequently issue an instrument instead of cash is 100% in order BUT
the comment that u should be in exaclty the same position after distribution as before to me is incorrect.
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DST
Super Contributor
Mr Cash Sir, what else must they aim at? If they ADvantage holders - who should pay, and if they DISadvantage holders, who should gain?
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JohnnyCash
Super Contributor
No little missy.. No one should be in a more advantagous or disadvantagous position apart from what the terms of the instalment governs! If the issuer passes on everything they receive (which is in the terms) the holder of an instalment will be better off by 50% of the distribution or R47 per BAWSTA as things stand.
Cause instalments have a double gearing u should be better off by 50% after the unbundling, Its quite easy if u can do ur maths.
Main problem for issuer of BAWSTA is that the current instalment would trade at a negative price of R4 (as things stand today) after the unbundling whilst still having a final instalment of R107.
The holder should get approximately the value of R95 per BAWSTA-instalment held. They can gladly take the number of all the BAWSTA's I hold times R95 and issue me with R25-PPC instalments. Fact is you gonna get double the PPC shares compared to holding the underlying and if the issue u with instalments u will get 4 times more PPC-shares under such an instalment.....
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gumbis
Occasional Contributor
Hahaha!!! funny .... Where do u meet and monitor trades ??
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SimonPB
Valued Contributor
we can't pay you in cash because we won't be getting any cash.
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JohnnyCash
Super Contributor
Simon, why does everyone keep on MIS-reading my posts. Im not gunning for cash. Im saying that INstalments let you participate fully in any distributions, right? So, at the current mentioned rate of 1,855 PPC for each BAW I would expect to be given 1.855 PPC shares (actual share cause that is what the issuer will receive?), not cash!
Im only using the cash example to show that if it was a cash distribution I would get all the cash, right? So why any different when it is in-specie? It is just an easy opportunity for the issuer to go and change the original terms of the instalment and to get another one out there?
Currently BAWSTA's terms have been set at issue and it has a R107 final instalment, so as a first instalment u pay the difference between spot and the final instalment?
By implication the share has gone cum-div / cum-distribution and any person paying the first instalment now actually pays cum-div so as the instrument works the holder should get all distributions?
To me an instalment warrant does not allow the issuer to reduce his debt portion (i.e. final instalment) as that would defeat the purpose.
I can see both scenarios working i.e. either distribute 1.855 PPCs to each holder of BAWSTA or splitting all the terms of the original warrant. The latter favours the issuer more cause it reduces his single debt to BAW and split it accross 2 shares? Of course u know which one I would prefer...
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SimonPB
Valued Contributor
OK, first we're talking about somethign which we know nothing about as the terms have not as yet been finalised. Further, the terms have to be adjusted, unless the basket option is used - but that option has been out fo favour for years so is very unlikely. Splitting and then also making adjustmenst is the preferred and as said after a split the terms HAVE to be adjsuted. if terms are not adjusted the instalment will expire under water and that'll really hurt you!
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JohnnyCash
Super Contributor
Simon, yes we are talking but the terms in principle have been published! Yes the ratios may change and it may change altogether but there's still principles already spelt out by BAW.
Can I suggest instead of talking to just do a quick calc on a spreadsheet with the numbers cause it will illustrate all my ramblings.
It is also more of a distribution than a share split, not?
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SimonPB
Valued Contributor
ya tis distribution (PPC split is moot). An yes teh BAW sens spells otu what they will do, BUT SAFEX has nto said how the response will be - an that's the crux.
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