I have held RPC for 13 months now, and it has performed very well over that time, up 55%. It is one of those shares I have been thinking of selling in the not-too-distant, as its stock rank is not that compelling (except for the momentum that is...which makes me think I want to hold on for a while longer)
However, now those of us who own RPC are being offered what seems a generous offer on the face of it. RPC is offering a one for five rights issue, in order to acquire global GCS group. The price they are selling these rights for is 460, quite a discount from the current price of 763. So the choices are... I can either buy these shares, or sell my rights to these shares, or do nothing and see if they pay me something eventually for them once the deadline is over. Once or twice in the past, I've bought rights issues when offered and I've noticed the shares dropped.. I suppose this is inevitable, or is it?
So my question to fellow private investors is what are your thoughts about rights issues in general, and also specifically RPC? What would you do in my shoes? Thank you, I look forward to a discussion, in what is my first post here.
Hi Alina.
As existing shareholders, we're being offered the right to by 1 share at 665p for every 4 RPC (LON:RPC) shares that we already hold. So long as the share price stays above this 665p level (ignoring transaction costs), it would presumably make sense to buy the new shares at 665p and sell them immediately rather than let the rights lapse. Given the current share price is about 944p, we are well above the 665p exercise price with quite a margin for further downward market movements.
From your comment about "being in the red", I sense you might be slightly confused by references to the "ex rights price" which is variously mentioned as being about 980p (and which the current 944p market price is now below). This is simply a reference point for commentators to assess what the new theoretical share price would have been on the date the RI was announced, and by extension a comparator to see whether or not the market likes the proposed deal. (The ex rights price is calculated as (4x the sp on the day of the RI + 1x the 665p offer price all divided by 5).). Since the RI and acquisition were announced, the RPC (LON:RPC) share price fell by about 5% ( compared to the ex rights price) suggesting the market wasn't that keen on the deal, although I see the share price today has made a bit of a recovery.
Your decision whether to take up the rights or not (or for that matter sell your rights) is primarily a function of the 665p exercise price being less than the current market price. Whether you the choose to hold the shares or sell them is then a decision based on your longer term view on the company's prospects.
All very confusing. Hope this helps a bit ...
Best,
Gus.
