Thursday, 21 May 2009

Lloyds Share Offer

I have received documentation from Lloyds Banking Group today, inviting me to apply for shares in a new scheme of theirs in order to raise more capital.

They are issuing 10,408,535,000 new shares at a cost of 38.43 pence each: Multiply that to see how much they want! This is called a Placing and Compensatory Open Offer.

I already have sufficient shares in Lloyds; thus there is a distinct lack of enthusiasm on my part, whether they rise to £10 per share in the long term, or not.

Their shares are languishing at 68p presently. I sold some about ten years ago at over £8 per share.


Mo said...

What happens if hardly any of the new shares issued by LLOY get brought?

Or what if a lot do buy at the discounted price and sell them straight away to double up...? wouldn't LLOY loose money instead of raising caital...?

personally I think the shares will drop to around 50 early part of next week.

Timothy Belmont said...

We'd need to see what other companies have done in that position. Presumably they'd need to raise the capital from another source.

I've been patiently biding my time for them to head up towards £10! I'll be grey by then. :-)

Anonymous said...

Lloyds will not loose money because this 'rights issue' will be underwritten. That means that - in return for a fee of 2-3% of the sum to be raised - the underwriter (often a bank) will guarantee the proceeds (ie what Lloyds wish to raise).

Should the shares in fact not be sold, the underwriter will try to sell them a few days later (those shares are called the 'rump'). Should that fail too, he will have to buy the shares to sell them at a later stage (that bit is called the 'stick').

If lots of people sell them (and even your right to subscribe for the shares in proportion to your existing holding can be sold), that would just depress the market price.

Just thought you'd like to know... :-)

Timothy Belmont said...

Many thanks for that. Oh, for those shares to attain the heady heights of yesteryear... :-)