Forum Archive Index - April 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

>
> I don't know if I have this correct , are the rights issue going to
> create more shares on issue?
>
Yes
>
> If I read it correctly the number of  shares will increase from 
> 567.5 m to 709.4m creating a dilution effect . 
>
Yes but the exact terms haven't been set yet.   Nevertheless your 
estimate  may not be too far away from what happens.
>
>With a proposed 1 for 3
>
What you proposed is 1 for 4, so let's stick with that
>
> ,this would mean 1/4 drop in
> shareprice wouldn't it ? 
>
No.   It is not a bonus issue, but a cash issue being proposed.   It 
looks like you have confused share price with NTA.   The NTA of Air 
New Zealand shares is $3.75.    If a cash issue was struck at $1.50 
on a 1:4 basis, the NTA would then become $3.30 per share.

After the cash issue much of the uncertainty and debt worries of Air 
NZ will be gone.  Hence you could expect the shares to trade much 
closer to their NTA than is the case now.

So rejigging your figures

 Using an example of airvb shares
 say we buy   40000 @ $2.65   =  $106000
 buy up rights10000 @ $1.50   =    $15000
 total shares   50000  costing    =   $121000
 
After rights issued shareprice goes from $2.65  to $3.30 
 total shares  50000 @ $3.30  =  $165,000.

 Net profit $44,000 
> 
> Now I am confused as to why institutions are willing to buy shares
> on behalf of Bry when they stand to make only 3cents a share(1%) at
> most .
>
Maybe  your original figures are wrong ?
>
>That is if the deal is struck at $3.00 a share
>  
If that is the price they make 45c per share.    Sounds much more 
attractive than 3c! SNOOPY



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