Need something Stock Markety Explaining

[Shelster]

At work we have an Employees Share Scheme to which I am subscribed and they purchase shares on my behalf each month.

As the company is now in a take over of another company for which they need to raise a fairly large lump of capitol, they have done a 'Rights Issue' to which I have three responses.

1. Sell Sufficient
2. Sell All
3. Buy All​

The 'explanation' sheet that came with the offer would not win any awards with the Clear English Society....it is as clear as mud as to what each option means.

I can kind of understand the last one, which means I personally pay the money for my allocated shares and they come through as a separate holding to my Scheme shares.

Am guessing that the second one means that I sell all that I have been allocated and then get the cash in the post (plus pay NI and tax on it)

With the first option, do the holding company sell my Rights shares and then use the funds from this to buy ordinary shares at market value and than add this to my scheme shares?

Just trying to work out if option 1 or 3 will be the better one to go for.....

 

[Shelster]

Shares are for Babcock and it is being run by Capita.

With what I hold, have the option for 21 New Ordinary Shares at price of £7.90 per share.

From the info sheet.....

Your Choice on the Rights Issue

As a holder of Existing Ordinary Shares in the Plan, you are entitled to take part in the Rights Issue. These are the three choices open to you

1 - SELL SUFFICIENT. You can instruct us to sell sufficient of your Rights to be able to use the net proceeds to subscribe for the rest of your Rights. You will then receive New Ordinary Shares. This will not require you to provide any funding and commission costs are to be met by the company.

2 - SELL ALL. You can instruct us to sell ALL the Rights allocated to you. Commission will be met by the company and net proceeds will be paid via payroll (inuring any NI and PAYE as standard.

3 - BUY ALL - You can instruct us to buy ALL the Rights to allocated to you and subscribe for all the New Ordinary Shares to which you are entitled. You will need to pay the full subscription price payable​

.

As you can tell, I know Bo Diddly about Stock and Shares, so need it explaining in simplest GD terms and also am wondering which is the best option to take finances wise. Am tempted for Option 3 as for the outlay of £165.90 I am getting £255.00 worth of shares (at current prices)

 

[Shelster]

Option 1 means you will get some shares but not all those you have a right to buy but it won't cost you anything.

Option 2 you will get no shares but get some cash

Option 3 you get all the shares you have rights to but will need to put up the cash.

As the issue will be at a price below market price the right to buy therefore has a value compared to buying in the market. This is what drives options 1 and 2.

Many thanks for the explanation.....

If I went for option 2, would the shares from that be sold at Market Price, or the reduced offer price?

Am more and more leaning to Option 3 out of this...may have a chat with Mrs S about it, see what she thinks.

Just wondering how many shares I would end up with if I went with Option 1? Is tempting that one too as basically get more shares into the Plan, but no outlay on my part, but won't be getting the 21 that I have the Rights for.....oh the decisions. I thought this would be easy.....

 

[Shelster]

After discussing with Mrs S, looks like I will be going for Option 1.

So my understanding is that Capita will sell my 21 Rights and then use the proceeds of that to buy shares to go into my Plan, but I won't be getting 21 shares from it.

Just wonder at what rate Capita will sell them at.....will it be at the £7.90 or at current market price?