Forum Archive Index - October 2000

["Rob Neal and Mandy Aldridge-Neal" <randmneal@xtra.co.nz>]

What is to stop somebody buying a large block of AIRVB shares at say $2.80 on Friday and selling on Monday. You would pick up the rights issue of 1 for 3 at $1.50 per share. OK the price should drop on monday when it goes ex but not by a huge amount as there is a dividend going ex the following week which will hold up the share price to a certain extent.

 

Do the maths:

 

30000 AIRVB gives you the right to buy 10000 more shares at $1.50 and you can then turn around and sell them for $2.80 thats a $13,000 profit (less brokerage). The share price would have to drop to about $2.45 before you lost money. A drop of 12.5% from Friday to Monday (lets be realistic isn't going to happen)

 

I'm not normally an advocate of buying on credit but surely when a good deal comes along you need at act. If the numbers add up then why not take advantage of the opportunity.

 

Any comments?

 

Cheers

 

Rob

Disc - Do not own any AIRVB yet!