Poll - 2018 Stock Picks - Include Rights?

[Oliver Mander]

This poll is what it says on the tin...do we include the impact of rights issues in the 2018 stock picks?
(ie, increase in investment, time-weighted %age)

[777]

Bumped.....

[Snow Leopard]

There are currently two 'rights issues' in progress on the NZX and they are very different:

HBL where the right can not be traded (use it or lose it);

TWR where the right can be sold on market.


So for the 2017 contest:

the HBL instance I intend to ignore (where does the money come from to buy extra shares?);

the TWR rights will be 'sold' at the closing price on the last day of trading and either new shares purchased on market with the proceeds or the cash amount treated like a dividend.

You can always rely on me to complicate the issue .

[winner69]

There are currently two 'rights issues' in progress on the NZX and they are very different:

HBL where the right can not be traded (use it or lose it);

TWR where the right can be sold on market.


So for the 2017 contest:

the HBL instance I intend to ignore (where does the money come from to buy extra shares?);

the TWR rights will be 'sold' at the closing price on the last day of trading and either new shares purchased on market with the proceeds or the cash amount treated like a dividend.

You can always rely on me to complicate the issue .

And often when you 'lose it' you get a little bonus cheque if they sell the shortfall for more

[Snow Leopard]

And often when you 'lose it' you get a little bonus cheque if they sell the shortfall for more

Forgot HBL doing that, (I applied for all mine) I will include that when we know what it is then.

[Oliver Mander]

There are currently two 'rights issues' in progress on the NZX and they are very different:

HBL where the right can not be traded (use it or lose it);

TWR where the right can be sold on market.


So for the 2017 contest:

the HBL instance I intend to ignore (where does the money come from to buy extra shares?);

the TWR rights will be 'sold' at the closing price on the last day of trading and either new shares purchased on market with the proceeds or the cash amount treated like a dividend.

You can always rely on me to complicate the issue .

That's exactly why (if we do it) I thought its fair to assume you take them up in the comp - HBL's were not traded, so can't ascribe a value.
So...

base investment at January 1st = $10,000 comprising $10,000 shares.
rights issue on June 30th 2018 for 2 for every 10, at a price of $1.10 each.
=> new base investment = $10,000 + $2,200 = $12,200 comprising 12,000 shares
at end of year, shares are $1.20 - or $14,400

$ return = $14,400 - $10,000 - $2,200 = $2,200
%age return:
- base: $2,000 / $10,000 = 20%
- rights: $200 / $2,200 = 9.1% x 2 for half a year = 18.2%
total return %age = 10,000/12,000 * 20% PLUS 2000/12000 X 18.2 %
= 19.7%

The power of spreadsheets make this all very easy...

[Snow Leopard]

That's exactly why (if we do it) I thought its fair to assume you take them up in the comp - HBL's were not traded, so can't ascribe a value.
So...

base investment at January 1st = $10,000 comprising $10,000 shares.
rights issue on June 30th 2018 for 2 for every 10, at a price of $1.10 each.
=> new base investment = $10,000 + $2,200 = $12,200 comprising 12,000 shares
at end of year, shares are $1.20 - or $14,400

$ return = $14,400 - $10,000 - $2,200 = $2,200
%age return:
- base: $2,000 / $10,000 = 20%
- rights: $200 / $2,200 = 9.1% x 2 for half a year = 18.2%
total return %age = 10,000/12,000 * 20% PLUS 2000/12000 X 18.2 %
= 19.7%

The power of spreadsheets make this all very easy...

I see that you can complicate it even better than I can.

If you are going to buy an 2,000 new shares @ $1.10 ($2,200) then you need to sell sufficient existing shares to provide that $2,200.
So if the market price at that time is (for example) $1.15 you sell 1,913 shares to buy 2,000 shares and you gain is 87 shares.

End of year = 10,087 shares at $1.2 = $12,104.35 or 21.0435%

[Then remember to handle the interim dividend on 10,000 shares before 30-jun and the final dividend on 10,087 after 30-jun)

[winner69]

Snoopy had a good suggestion as to how to handle rights

Can't quite recall what it was but it was good

[Baa_Baa]

Snoopy had a good suggestion as to how to handle rights

Can't quite recall what it was but it was good

For the sake of a competition, can one assume 'rights' are taken up by all shareholders and therefore accrue to the value of the (their) SP performance, if not or maybe the head share (?) which is the measure of performance. What happens to those who do not take up their 'rights', should they be penalised, or is 'rights' treated as a blanket gain on a SP? Confusing, which is probably why it has been left out of previous PS comps.

I don't think discretionary gains through rights should be incorporated into SP performance.

[777]

The value of the right can easily be calculated whether traded or not. That amount can be simply be cash and added in like dividends.