Forum Archive Index - November 2000

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

Hi Brian

 

I am in a similar predicament to you.

Here is my plan of action:

 

1)  Wait till Mon / Tues next week

2)  See what FFS shares are trading at

3)  If 24 cents or better, send in the cheque for the rights application

4)  If less than 24 cents, buy extra FFS with the money earmarked for exercising the rights, and sell FFSRA at whatever price is going at the time.

 

My reasoning for the 24 cent threshold, is that IMHO the new preference shares are likely to trade at a slight premium to FFS (because they rank ahead of FFS in the admittedly unlikely event of liquidation).

A 1 cent premium seems reasonable, maybe it could be as high as 2 cents.

 

Hence, I would rather be the proud owner of the new preference shares rather than FFS.

But if FFS are going significantly cheaper than the cost of exercising the rights, that would probably be the better way to go.

 

This is a new ballgame to me, so I'm approaching it from what is probably a naive perspective.

Any comments and alternative suggestions welcome.

 

RIGHTS TRADING

===========

 

It is tempting to take a punt and buy some rights at 0.2c, with the possible intention of selling them late next week.  But the issue of needing to receive the paperwork before the rights may be exercised worries me.  Also I have heard some comments that various brokers require 25c extra per right to be lodged in your call account before they will sell rights to you.

With the advent of web-based trading accounts, this restrictive approach seems a little hard to believe.

1)  Has anybody been trading rights successfully?

2)  Are there any hangups along the lines I have mentioned above?

A further concern is whether there is sufficient liquidity in the market to absorb (say $5k or $10k) worth of rights in a short time-frame.

Anybody have any comments?

 

Cheers

 

Grant Keymer
____________