Forum Archive Index - October 2000

["Grant Keymer" <grant@jenlogix.co.nz>]

OK, here's the details about Telecom Installment Receipts.

I held some TELCA from Oct 99 until Feb 00 when I sold them @ $5 (thank God!)

Made a tidy profit having bought @ $3.40 but as you say, liquidity was a problem at times.

 

TELCA stopped trading on Sept 1 at which point holders had 2 options:

 

1)  Roll over into new TELCB with a payment of $1.50 per share.

2)  Pay $4.70 to receive TEL ordinary shares

 

If option (1) to roll over to TELCB was taken, holders of these shares are now in the following position:

 

==>  Final installment of $3.75 is due on 1/3/2002

 

This consists of 55c per share interest as well as the balance of $3.20 (remaining after the $1.50 in (1) above was deducted from the $4.70 owing).

 

Craig & Co (from where I got this info) were recommending that holders pay the $4.70 to upgrade to TEL shares because of the illiquidity of installment receipts.  TELCA were bad enough, but TELCB are much worse from what I've seen.  On many days there are very few (or even no) trades.  e.g. only 3 trades for all of today while TEL head shares were being slaughtered!

 

The leverage is greater, you are right, but remember that can work both ways!

The main thing I noticed while holding TELCA was that extreme peaks or troughs in the head TEL shares were not always reflected in the installment receipts.  Thus they were not so attractive from a trading point of view.

 

TELCB could be very good (all things going well), or could be very bad... Caveat Emptor!

 

Cheers

 

Grant Keymer
____________

(Disc: Hold some TEL bought Sept 22 @ $5.89).

Have stayed away from TEL between Feb and Sept.

Have I done the right thing in buying in again???  Time will tell  :-(