Forum Archive Index - December 2000

["John Ascroft" <jascroft@cardinal.co.nz>]

I am really sick of hearing Air NZ quoted as a pointer to why the FFS shares will drop post rights. The situations are completely different.

 

In most cases, shares rise following a rights issue because selling pressure is applied as holders can't afford to take up their rights, this means that the rights or shares are dumped. This is obviously exacerbated when the price to pay for the rights is high relative to the value of the shares when the rights are announced (as was the case with FFS).

 

A holder that can afford to, should take up the rights to avoid dilution of their existing investment. Once the speculators and bandwagon followers have been shaken out of the trees then the shares should recover to a theoretical value in the 50c range. This makes the shares look quite attractive at the moment....