Sens came out yesterday: The Rights Issue will consist of an offer of 55,555,556 new Discovery shares in the ratio of 9.38641 new Discovery shares for every 100 Discovery shares held on the record date of the Rights Issue, being Friday, 20 March 2015, at an issue price of R90.00 per Discovery share What would this be in "plain" English? Would it be a good deal to buy DSY at the moment ? Can we expect DSY share price to go down ?
Am I missing something? Why would it makes sense to buy for eg 1000 DSY shares at R127 ea now (just for simple maths) That equals R127000 (plus costs) Then you qualify for 93.86 DSY shares (ie 9.386 shares for every 100 DSY shares you own)to be bought at R90 = R8447 (?? about costs here) So you will have 1093 DSY shares costing you : R127 00 plus R8447 = R135 447 That is R123.92 a share (Roughly speaking without the costs etc) If we think, the share price may dip to R90 on Monday, why would I want to buy it to-day?
You right Simon, we dont know how far it will drop Though the chances for a drop , is quite good If it only drops to R123 (my calculation did not include costs) - how does it make sense to buy it today? Am I missing something here?
don't forget that you will be given an NPL which should be worth the difference in the rights issue price and the current traded price. NPL's are tradable, so you can cash in and not have to buy more (which would a bit daft, IMO - better to take the issue and buy more - helluva deal DSY are offering you)
If one does not hold any DSY and wants to get in now at current prices and take up your rights you will end up with an approx. cost of 126 per share. Does that mean the NPL will trade as much as 36?. I doubt it.
Hi brainware. I do not agree your calculation that the your cost per share will be roughly R123.92. It will actually be much higher as you have to use the wac (weighted average cost) method to get an accurate cost per share.