Bank of Ireland Rights Issue explained

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Brendan Burgess

Brendan Burgess

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I can’t find the official information anywhere online. Anyone got a link?

You can call Computershare on 1800 930 490 from Ireland or +353 1 247 5414 from outside Ireland.

Timetable
Wednesday 19 May - Shares bought on or before this date will qualify for rights.
Thursday 20 May Ex Date
– Rights start dealing on the Stock Exchange
- Share price will fall to reflect ex-rights price

31 May 3 pm deadline for selling all your rights

2nd June 3 pm Deadline for opting to sell some rights and exercize others
Tuesday 8 June 11am - Closing date for taking up all your rights

Nominee accounts
If you have a nominee account, your stockbroker will set earlier closing dates so that they can respond to the dates above.


The basics
For every two shares you own, you have a right to buy three shares for €0.55 cents each.

So if you own 2,000 shares, you can buy 3,000 shares which will cost you €1,650

Should I buy the shares?
We don’t speculate about individual share prices on Askaboutmoney.

You should make this decision as part of your overall financial strategy. If you invest in shares, you should have a diversified portfolio of shares.

If a high proportion of your wealth is already in Bank of Ireland or banking shares generally, you should not buy any further shares.

If Bank of Ireland represents an appropriate part of a balanced portfolio, you may wish to buy additional shares.

But aren’t they a great bargain?
Not really. You are not really getting cheap shares or a special bargain.

The rights have a value and you will be able to sell these while keeping your original shares.

The numbers –

2000 old shares|€1.50|€3,000
+3,000 rights|€0.55cents|€1,650
=5,000 new shares| worth|€4,650
The theoretical ex-rights price should be €0.93 cents (€4650/5,000)

So you should be able to sell your rights for €0.38 cents each (0.93 - 0.55)

This is a theoretical price. As the underlying price of Bank of Ireland shares is so volatile, this will rise and fall in line with that.

I want to subscribe for new shares but I have no money?
Then you can sell some of your rights in the market and use the proceeds to buy the remainder of the new shares.


How do I sell my rights?
You will receive a Provisional Allotment Letter. You can mark this that you want to sell your rights and Computershare will sell your rights for you.


 You can assign the PAL to your stockbroker who will sell the rights immediately on the open market.

What do I do if I own my shares in a nominee account?
The stockbroker will send on the documentation to you and presumably your return it to them.

What if I do nothing?
If you do nothing, your rights will be sold in the market by Computershare and you will get cash.
Your 2,000 shares which were worth €3,000 will now be worth €1,860. The amount of cash will depend on how the market values the rights and the supply and demand on the day.

But won't my shareholding be diluted if I do nothing?
If you control 50% of a company and a rights issue dilutes your control, then dilution is a meaningful concept. It is a meaningless concept for a tiny shareholder. What matters is cash and the value of your remaining shares.

Can I buy shares at the reduced price if I am not a shareholder?
You will need to buy rights first through a stockbroker. It may be simpler just to buy ordinary shares in the market from Thursday or Friday onwards.


 
Hi Brendan. I have BOI shares. I was wondering if I decided not to participate e.g. sell my rights, would I get the number of shares that I WOULD have purchased, if taking them up, at the price of 0.38 cent per share e.g.
based on the example you gave above, would I get 3,000 x 38 cent before tax back ?
 
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I assume sale of rights will be subject to CGT?. According to Davy website there will also be commission charges on sale of rights.
 
MeathCommute said:
Hi Brendan. I have BOI shares. I was wondering if I decided not to participate e.g. sell my rights, would I get the number of shares that I WOULD have purchased, if taking them up, at the price of 0.38 cent per share e.g.
based on the example you gave above, would I get 3,000 x 38 cent before tax back ?
Click to expand...

If you have 2,000 shares, you will still have 2,000 shares after the Rights Issue.

You will be able to sell 3,000 rights at 38 cents each, so you will get €1,140 cash.

Your 2,000 shares will fall in value to €1,860 (2,000 @.93)

So your total value will be €3,000

Your current value is 2,000 shares @ €1.50 which is €3,000.
 
Capital Gains Tax

Yes, there will be a deemed partial disposal of shares. The Revenue will issue a factor. It would be something like 34%.

So you can set 34% of the initial cost of the shares against the proceeds of the sale of the rights. If you bought the shares before the big falls, you will have a CGT loss. If you bought them when they hit the lows, you will have a gain.
 
So the price has fallen from €1.40 cum-rights yesterday to 88 cents ex-rights this morning, which is about right.

2000 cum-rights shares|1.40|€2,800
3,000 |0.55|€1,650
5,000 new shares| |€4,450
Value per share||0.89
Theoretical value of rights 0.34 (0.89 - 0.55)

I can't find the rights quoted anywhere
 
Congrats Brendan on the clear and simple way you explained the impact of the rights unlike many others who waffle on about diluting your holding which only confuses the ordinary person
 
There is a good report from Joe Brennan in today's Irish Independent

Yesterday, you could sell your rights in the market for 22 cents each.

You can follow the price of the nil-paid shares ( i.e. the rights) on the Irish Stock Exchange website
http://www.ise.ie/app/equityDetails.asp?equity=74622 I don't know if they are quoted on a more up to date basis anywhere else.

Brendan

Wednesday's share price close of €1.40 pointed to an inherent value -- or what is known as its theoretical ex-rights price -- of 89c per share, according to analysts, when the terms of BoI's deal is factored in.





However, the stock closed yesterday at 76.5c, marking an effective 14pc drop in its value, amid huge volumes, as 43 million shares traded hands.





Dealers said that all else being equal, the nil-paids would have been worth 35c (90c minus 55c), based on Wednesday's share price close. However, they closed yesterday at 22c as 14 million of the rights traded.
Click to expand...
 
I want to buy Bank of Ireland shares. Should I buy them directly or buy the rights?

Let's say you want to invest €760 in Bank of Ireland shares at the latest price of 0.76 cents. The rights should be exactly 0.21 cents ( 76 - 55) .

You can buy 1,000 shares in the market at 76 cents each.

or you can buy 1,000 rights for €210.
Then you will pay €550 to buy the new shares, so the cost will be the same.

If the share price falls by 10%, you will lose €76 either way.

Of course, €76 is 36% of the €210 investment in buying the rights.

So buying the rights is a highly geared way of investing in Bank of Ireland shares.

If the share price falls by 30%...
You will lose €228 through buying the shares directly, but only €210 by buying the rights.
 
Disclosure

The above information does not constitute a recommendation for the shares or for the rights. It is simply an explanation of the mechanics.

We do not allow discussion of individual share prices on askaboutmoney. See our

I have purchased rights as part of my overall portfolio.
 
Just for people's info - the rights issue is not available to ADR holders by the look of things. Those holders are being cashed out for the value of the rights, rather than being offered the right to take up shares. If anyone has any different information, I'd be delighted to hear it. This is info that I got from Bank of NY Mellon - it appears (to me) that they are treating all ADR holders as US residents (thereby being excluded from the rights issue per se).
 
Just a little confused about one thing. I got a letter from Goodbody saying the default option is 'do nothing' i.e. your holding will remain the same and you have to opt-in to take up the rights. This is very clear. I don't wish to take up the rights so I 'do nothing'. However then it said in the paragraph below if you wish to sell your rights contact us etc. Why would anyone want to 'do nothing' (i.e. if you don't want the take up the rights yourself, surely you would sell them as you have nothing to lose by doing so) and *not* sell their rights, or am I missing out on something obvious??
 
Hi Girl

You have a choice of doing nothing or selling the rights in the market.

if you do nothing, the company will sell your rights on the 8th June and give you the proceeds. It's impossible to know whether this will be more or less than you would get by selling the rights in the market yourself.
 
What are the implications of today's fall in the BoI share price to 65c, given the rights issue share price is 55c?

IMO - the rights issue is no longer as 'attractive' as it was and the sale of the rights will raise little, about 10c per share. Am I correct?

Slim
 
Online share trading with AIB - how to get BOI offer details

Hello all,

I have an online share account with AIB.

I hold some BOI shares in this account.

I have recieved no letter or details relating to the rights offer.

Are AIB slow in sending them out or do i need to do something to get details?

Thank you for your help.
 
Afterflood - I received a letter from them dated 21st May. You should probably give them a call...
 
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