Daily ShareChat: Pyne Gould Corporation

By Jenny Ruth

Monday 12th October 2009

Pyne Gould Corp's six-for-one $237 million rights issue has an "all or nothing" flavour to it, says McDouall Stuart.

"With the extent of the capital outlay involved, holders need to carefully consider their available options and positions," it says.

If investors do nothing, they will be deeply diluted. "Our view is that most investors face one of two choices: 1/ exercise their rights, recognising the significant capital commitment involved in doing so, or 2/ sell both the rights and the head shares," the broker says.

Strong selling of both the rights and the head shares in the first two days of rights trading "suggests that many holders are seeking their exit from both security classes."

The extent of selling makes it difficult to see pricing moving meaningfully up from current levels although the fact the issue is fully underwritten means there should be support for the shares at 40 cents, McDouall Stuart says.

The shares ended last week at 41 cents compared with their $1 price before the extent of the capital raising was revealed while the rights ended at 0.4 cents.

"Each holder's decision will depend on their circumstances. We strongly recommend speaking with your advisor to discuss the course of action that best suits individual situations."

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