h1

Lloyds Prices Rights Issue at 60% Discount[Money Making]

November 24, 2009

A rights issue is when a company issues new shares and sells them to existing shareholders at a discount to the listed share price.The shares are being sold at a discount of 59.5% to Monday’s closing price in order to raise £13.5bn from the sale thus avoid taking part in the government’s banking insurance scheme – the Asset Protection Scheme.Shares in Lloyds, which is 43%-owned by the government, were up 1% in morning trading.

A total of 36.5 billion new shares will be issued – that amounts to 1.34 new shares for every one already in existence.

The sheer number of new shares has raised fears that the value of each one will be diluted.

Robert Talbot from Royal London Asset Management said the company’s fate is ultimately linked to the performance of the UK economy.

“I think it puts them into a much stronger capital position to be able to withstand whatever lies ahead. The crucial question facing the bank over the next two to three years is what happens to the UK economy,” he said.

Lloyds has 2.8 million shareholders and Britain’s largest number of private investors. Shareholders will meet on Thursday in Birmingham to approve the plan.

It will cost the average shareholder £336.67 to take part in the share sale. They do not have to buy the new shares but if they do not they will see the stock that they already own diluted in value.

The rights issue is part of Lloyds’ wider plans to raise about £22.5bn overall.

It said on Monday that it had secured over £8.8bn from a bond issue.

source BBC

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: