# CRH Rights Issue explained



## Brendan Burgess (5 Mar 2009)

The rights issue allows someone who holds 7 shares to buy 2 new shares for €8.40 each 

So if you have 7 shares today, the value of your holding is:

7 shares at today's price €15 =  €105
7 dividends due @0.58= €4
2 nil paid rights @ 6.60= €13
Total value                             €122

Shares bought up to Tuesday were sold cum rights. 
Shares sold since yesterday, were sold ex rights. 
The 7 shares are cum dividend.
The new shares won't have a dividend. 

_Am I double counting the dividend here? When the share goes ex-dividend, it should fall in value by €0.58. _

*Price of shares
*You can get the prices on the ISE websiteThis is not speculation about prices, just a discussion of the mechanics.

The cum rights shares were last dealt in at €15.50 on the 3rd March.
The following day the rights per share were worth €2 (€7.23 x 2/7)
So all else being equal, the ex-rights share should have dropped to €13.50. 
In fact, it rose to €16.20

So the value of a person's holding rose by 20%.


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## Brendan Burgess (5 Mar 2009)

If you want to buy CRH shares, it doesn't matter if you buy the rights or the shares. 

Share price now:  14.65
Less dividend: €0.58
Less cost of new shares: 8.40
theoretical rights price: 5.67

The rights are trading at €5.80 

I suppose you will pay income tax on the dividend which explains the difference.


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## Brendan Burgess (5 Mar 2009)

The general volatility of shares these days make such calculations a lot less relevant. 

The ex rights share should have dropped significantly in value, but it rose. 

Brendan


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## Claragh (8 Mar 2009)

When I buy these rights issue shares can I sell them at the normal market price ?


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## smiley (8 Mar 2009)

claragh..yes you can; when the rights issue is finalised. You will find though that when all the new shares hit the market the share price will collapse, so you will not have an opportunity to make a huge profit if you sell the shares. If it was that simple lots of people would do the same thing.


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## I.M.E. (8 Mar 2009)

Brenden,

I was just going through the figures there to figure out what the share price should adjust to. This is what I got:
Current outstanding 531.8 (There are many exact figs floating around so rounded off)
Mkt value 531.8*15.02 (share price of €15.50 - .48 dividend) = 7987.6
Mkt value of Rights issue 152*8.40 (RI price) = 1276.8
Total new mkt value = 9264.4

New total shares outstanding = 683.8

Therefore all things being equal the new share price should be the sum of:
Total new mkt value / Total new shares outstanding
9264.4 / 683.8 = 13.55

So, one could reasonably expect the value of the share price to fall to €13.55 to reflect outcome of rights issue?
Obviously this might not happen but given the Share price and dividends above this would be fair value?

Do I have this right?


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## cole (9 Mar 2009)

Today's prices are

CRH PLC 13.44
CRH NEW ORDINARY NIL PAID 4.53

So if I accept the rights issue does this mean that I'm paying 8.40 for a share that's trading at 4.53?


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## Brendan Burgess (9 Mar 2009)

No, you are paying €4.53 for the right to 
buy a share at €8.40

So a share will cost you €12.93

Alternatively, you can buy a cum-dividend share in the market today at €13.44 
Strip out the dividend of 0.58,
 and it is really costing you €12.86

Brendan


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## cole (9 Mar 2009)

Thanks for clearing that up for me Brendan.


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## cautious (9 Mar 2009)

I still don't understand much of this. If I simply do nothing am I losing out in some way by not taking up the offer of shares at a reduced price


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## donncha (10 Mar 2009)

In terms of the mechanics, is there any difference between these -
- Option 1, taking up the rights; followed by selling immediately
- Option 5 (Doing nothing), and getting a cheque if the current share price is greater than the issue price.

Obviously there is more effort involved in Option 1, but apart from that are these two basically the same?

Thanks


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## Olympian (10 Mar 2009)

I haven't received anything from my broker (NIB) about this. Should I have received a prospectus etc by now. Isn't the closing date next week?


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## dharn1 (10 Mar 2009)

you should have gotten a letter from nib by now as you have to have replied by march 13 ring nib on 014843500


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## eggerb (10 Mar 2009)

donncha said:


> In terms of the mechanics, is there any difference between these -
> - Option 1, taking up the rights; followed by selling immediately
> - Option 5 (Doing nothing), and getting a cheque if the current share price is greater than the issue price.
> 
> ...


 

Interested in thoughts on this also if anybody can shed any light!


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## Brendan Burgess (10 Mar 2009)

cautious said:


> I still don't understand much of this. If I simply do nothing am I losing out in some way by not taking up the offer of shares at a reduced price



If you have 7 shares in CRH at the moment, they are worth €105 in total (7 x €15 - the price used in the first post for simplicity) 

You can buy 2 new shares for €8.40 each. 

If you do nothing, then CRH will offer the _new shares _to the market on the final day. The market should pay €15 each for them or €30. CRH will deduct the rights price of €16.80 and pay you over €10.20. 

So you have to either 
Increase your investment in CRH  - buy buying new shares
or
Reduce your  investment in  CRH - buy doing nothing. 

If you want to maintain the absolute value of your investment, you can do nothing and use the money received from CRH to buy new CRH shares in the market at €15.

Brendan


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## donncha (10 Mar 2009)

Thanks Brendan, that is helpful.


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## cautious (10 Mar 2009)

Thanks also Brendan. I also found it very helpful.


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## eggerb (10 Mar 2009)

+1 thanks Brendan


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## monnigblower (12 Mar 2009)

_No, you are paying €4.53 for the right to 
buy a share at €8.40

So a share will cost you €12.93

Alternatively, you can buy a cum-dividend share in the market today at €13.44 
Strip out the dividend of 0.58,
and it is really costing you €12.86

Brendan_ 


Hang on a minute. I don't understand this €4.53. I received a Provisional Allotment Letter with application form at the back and there is no mention anywhere of the €4.53 anywhere. I understood from this letter that I just send back a cheque for the amount as specified in Box 3 in my case and that was it - extra share popping my way then.

Also does anyone know the indebitness of this company? Why are they raising money? Is it just to pay off a debt or are they hoping to cash in the proposed US roadbuilding scheme which may or may not take off.

-M


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## phenomenon (12 Mar 2009)

Brendan said:
			
		

> If you do nothing, then CRH will offer the _new shares _to the market on the final day. The market should pay €15 each for them or €30. CRH will deduct the rights price of €16.80 and pay you over €10.20.
> 
> So you have to either
> Increase your investment in CRH - buy buying new shares
> ...


 
Thanks for info Brendan. Just a quick question about any possible payment if i decide to do nothing -

My Rights Issue letter from DAVY states that:
"Option 2 - Take no action
The nil paid shares will lapse. If you let the shares lapse, the company may sell the shares in the market and you may be entitled to a cash payment in relation to 'lapsed rights proceeds'. This will be at the discretion of the Company and may be zero."

Are they simply covering themselves here ? i.e. I and other shareholders will most likely receive a payment at some level in respect of the forgone rights issue shares should we decide to do nothing?

Any info appreciated.
Cheers.


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## BM146 (14 Mar 2009)

I had 250 CRH shares.  I took up my rights to 71 new shares.  When will I be able to sell all of these shares (250 + 71)?  In other words, when will the rights issue shares start coming on the market as fully paid ordinary shares?


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## Brendan Burgess (14 Mar 2009)

monnigblower said:


> Hang on a minute. I don't understand this €4.53. I received a Provisional Allotment Letter with application form at the back and there is no mention anywhere of the €4.53 anywhere. I understood from this letter that I just send back a cheque for the amount as specified in Box 3 in my case and that was it - extra share popping my way then.
> 
> 
> 
> -M



The €4.53 was the market price of the option on the day of that post. That is what the stockmarket valued a right to buy one share at.



> Also does anyone know the indebitness of this company? Why are they raising money? Is it just to pay off a debt or are they hoping to cash in the proposed US roadbuilding scheme which may or may not take off.


We don't allow discussion of the valuation of shares on Askaboutmoney.


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## Brendan Burgess (14 Mar 2009)

BM146 said:


> I had 250 CRH shares.  I took up my rights to 71 new shares.  When will I be able to sell all of these shares (250 + 71)?  In other words, when will the rights issue shares start coming on the market as fully paid ordinary shares?



According to the Shareholder Guide, dealings began in the New Ordinary Shares on 4th March, so in theory, you can sell them now.

But ask your broker. They will not sell certificated shares until you lodge the share certs with them, and you won't get the share certs until 22 April.


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## Brendan Burgess (14 Mar 2009)

phenomenon said:


> Thanks for info Brendan. Just a quick question about any possible payment if i decide to do nothing -
> 
> My Rights Issue letter from DAVY states that:
> "Option 2 - Take no action
> ...



No, they are not simply covering themselves. 

If the share price on the day is €16.40, then the rights will be worth €8 on the day. (€16.40 - €8.40) 

In theory, you should get €8 for each of your rights.

I am not sure what happens in practice.  If they sell all the rights which were not taken up in one go on 18th March, will the share price reflect that?


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## Brendan Burgess (20 Mar 2009)

The fully paid new ordinary shares ( which don't qualify for a dividend) were €14.70 on 17th March and were dealt at 10.30 am  at €15.48 on the 18th March. 

Take away the €8.40 subscription price, and so those who held rights should get around €7 per right. 

Has there been any announcement about this? 

Of course, they might not have been sold yet as they probably have been busy since Wednesday trying to see who has not subscribed for the rights. 

Brendan


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## Brendan Burgess (20 Mar 2009)

According to today's Irish Times, the issue was 95% subscribed.

The remaining units were placed in the market at €15.95, so those who did not subscribe will get €7.55 per share. 

This seems fair enough. I thought that there might have been a technical drop in the share price due to the "oversupply" of shares. 

Brendan


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## eggerb (20 Mar 2009)

Brendan said:


> The remaining units were placed in the market at €15.95, so those who did not subscribe will get €7.55 per share.


 
(Maybe I should post in Taxation?)

Does anybody know how this €7.55 per share will be taxed?


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## mattmacg (11 Apr 2009)

I have CRH shares. I didnt take up the rights. My rights were sold and I have now recieved a check for this. 
How is this taxed? Is it taxed as capital gains, income or dividend?


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## Brendan Burgess (11 Apr 2009)

It will be taxed as a part disposal of shares. 

You will have to work out the cost of the shares disposed of.

I think that Revenue will issue a guideline to say that you have disposed of, for example, 17% of your shares. 

I got this on the Revenue website. It's not the same question, but if you follow the examples, you might find something closer. You might follow it up and let us know how it works out



> Occasionally the shares received in a bonus or rights issue will be shares of a different class to the shares held, e.g., one new Preference share for every two Ordinary shares held and so on. Where this happens the position is essentially the same as above except that it is necessary to apportion the allowable cost - including enhancement expenditure in the case of rights issues - between the different classes of shares. See Example 7, Chapter 11. 25 Guide to Capital Gains Tax Chapter 9 Returns, Appeals and Payment - Self-Assessment 1.


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## mattmacg (11 Apr 2009)

Thanks. I bought the shares at €25 so it will probably be a capitals loss. 
I will ask my accountant. I will post if I find out more.


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## Flann O'B (4 Oct 2009)

Mattmacg,

Like yourself I did not take up my options in this rights issue.

With the "initial period" CGT payment required by 15/12/2009, I was wondering if your accountant could shed any light on how exactly this "deemed part disposal" would figure in the CGT calculations...?

I haven't seen any examples of "deemed disposals" that exactly fit the bill for this sort of scenario.

Many thanks,
Flann


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## polar (30 Jul 2010)

Did anyone come up with an example for working out how to calculate a gain/loss to be declared for tax when the rights were sold and a premium payment awarded instead? It's nearly Form 11 time...


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