Author Topic: RR - Rolls-Royce  (Read 118449 times)

aryadhana

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Re: RR - Rolls-Royce
« Reply #300 on: July 30, 2020, 06:53:01 AM »
Don't know why they didn't make an effort to buy sell more earlier.  They can issue current shareholders rights to buy one or two shares at £2.00 (a 20% discount... heck it could be for £1.00 and the economics wouldn't change).  Shareholders who don't want to participate can sell their rights to compensate for any dilution, and nothing is lost.  In fact they should just raise too much and return it in the form of excess dividends or buybacks as the course of assets, liabilities, and opportunities becomes more clear.  It's a company with quality assets and a lot of franchise value making important stuff.  They just need to raise enough to deleverage and have enough cash leftover to very reliably moot questions about unexpected capex or other contractual liabilities. 

Anyway trading near March lows today.  Maybe I'm missing something.  (Opened a position today).
« Last Edit: July 30, 2020, 09:08:22 AM by aryadhana »


Broeb22

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Re: RR - Rolls-Royce
« Reply #301 on: July 30, 2020, 08:03:49 AM »
Don't know why they didn't make an effort to buy more earlier.  They can issue current shareholders rights to buy one or two shares at £2.00 (a 20% discount... heck it could be for £1.00 and the economics wouldn't change).  Shareholders who don't want to participate can sell their rights to compensate for any dilution, and nothing is lost.  In fact they should just raise too much and return it in the form of excess dividends or buybacks as the course of assets, liabilities, and opportunities becomes more clear.  It's a company with quality assets and a lot of franchise value making important stuff.  They just need to raise enough to deleverage and have enough cash leftover to very reliably moot questions about unexpected capex or other contractual liabilities. 

Anyway trading near March lows today.  Maybe I'm missing something.  (Opened a position today).

One thing that always surprises me is how often companies raise capital at the lows. Your comment totally makes sense, but the same could have been said years ago when the share price was higher and some of these issues were known. I know East probably would have been crucified years ago by investors because the stock was "too cheap" then to be raising capital. Behaviorally its tough to raise capital when you don't need it for a potential, hypothetical time in the future when you may need it, but it sure beats the shit out of massively diluting yourself at the lows.

TwoCitiesCapital

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Re: RR - Rolls-Royce
« Reply #302 on: July 30, 2020, 08:13:42 AM »
Don't know why they didn't make an effort to buy more earlier.  They can issue current shareholders rights to buy one or two shares at £2.00 (a 20% discount... heck it could be for £1.00 and the economics wouldn't change).  Shareholders who don't want to participate can sell their rights to compensate for any dilution, and nothing is lost.  In fact they should just raise too much and return it in the form of excess dividends or buybacks as the course of assets, liabilities, and opportunities becomes more clear.  It's a company with quality assets and a lot of franchise value making important stuff.  They just need to raise enough to deleverage and have enough cash leftover to very reliably moot questions about unexpected capex or other contractual liabilities. 

Anyway trading near March lows today.  Maybe I'm missing something.  (Opened a position today).

One thing that always surprises me is how often companies raise capital at the lows. Your comment totally makes sense, but the same could have been said years ago when the share price was higher and some of these issues were known. I know East probably would have been crucified years ago by investors because the stock was "too cheap" then to be raising capital. Behaviorally its tough to raise capital when you don't need it for a potential, hypothetical time in the future when you may need it, but it sure beats the shit out of massively diluting yourself at the lows.

I'm always shocked when companies decide to do a  new issuance instead of a rights offering. Rights offerings are massively more shareholder friendly in that you give your existing shareholder base first rights of refusal and the ability to participate at the same terms. It's slightly less guaranteed than a new offering (because you don't have to exercise the rights), but you're paying up for the that guarantee with the underwriters :/

I get it when you're in dire need of the money, but it doesn't seem to me that RR is knocking on deaths door.

Why is it more companies don't do this sort of thing?

aryadhana

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Re: RR - Rolls-Royce
« Reply #303 on: July 30, 2020, 09:22:19 AM »
Quote
One thing that always surprises me is how often companies raise capital at the lows. Your comment totally makes sense, but the same could have been said years ago when the share price was higher and some of these issues were known. I know East probably would have been crucified years ago by investors because the stock was "too cheap" then to be raising capital. Behaviorally its tough to raise capital when you don't need it for a potential, hypothetical time in the future when you may need it, but it sure beats the shit out of massively diluting yourself at the lows.

That's my frustration.  There's nothing particularly "dilutive" or not about raising equity for good reasons.  Shareholders who think they're getting screwed can and should just participate (or sell their right to do so). 

Quote
I'm always shocked when companies decide to do a  new issuance instead of a rights offering. Rights offerings are massively more shareholder friendly in that you give your existing shareholder base first rights of refusal and the ability to participate at the same terms. It's slightly less guaranteed than a new offering (because you don't have to exercise the rights), but you're paying up for the that guarantee with the underwriters :/

To be honest, I'm not even sure it's less guaranteed.  How could the distribution of decidedly in-the-money rights fail to be subscribed?  Now if the rights offering comes out of nowhere and bespeaks some hidden or otherwise unknown problem then the very indication that the offering would be pursued might push share prices down enough for the offering to fail.  Likewise if there is no franchise value and company is just an option on negative equity.  That's not the case here.  This looks nothing like HTZ and there's obvious value (which is why people are paying for it every day). 

Rights issues are more common in Europe than America (guessing that England falls somewhere in between). 

rb

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Re: RR - Rolls-Royce
« Reply #304 on: July 30, 2020, 01:49:45 PM »
Don't know why they didn't make an effort to buy more earlier.  They can issue current shareholders rights to buy one or two shares at £2.00 (a 20% discount... heck it could be for £1.00 and the economics wouldn't change).  Shareholders who don't want to participate can sell their rights to compensate for any dilution, and nothing is lost.  In fact they should just raise too much and return it in the form of excess dividends or buybacks as the course of assets, liabilities, and opportunities becomes more clear.  It's a company with quality assets and a lot of franchise value making important stuff.  They just need to raise enough to deleverage and have enough cash leftover to very reliably moot questions about unexpected capex or other contractual liabilities. 

Anyway trading near March lows today.  Maybe I'm missing something.  (Opened a position today).

One thing that always surprises me is how often companies raise capital at the lows. Your comment totally makes sense, but the same could have been said years ago when the share price was higher and some of these issues were known. I know East probably would have been crucified years ago by investors because the stock was "too cheap" then to be raising capital. Behaviorally its tough to raise capital when you don't need it for a potential, hypothetical time in the future when you may need it, but it sure beats the shit out of massively diluting yourself at the lows.

I'm always shocked when companies decide to do a  new issuance instead of a rights offering. Rights offerings are massively more shareholder friendly in that you give your existing shareholder base first rights of refusal and the ability to participate at the same terms. It's slightly less guaranteed than a new offering (because you don't have to exercise the rights), but you're paying up for the that guarantee with the underwriters :/

I get it when you're in dire need of the money, but it doesn't seem to me that RR is knocking on deaths door.

Why is it more companies don't do this sort of thing?
I'm with you on this one. Especially because rights offerings are actually quite popular in Europe. When I was in London in 08/09 there were rights offerings left right and center. Sometimes they would do right and then a secondary if the rights didn't bring in enough. Which is also cheaper cause you pay % comish on your secondary.

It could be that the situation at RR is worse than it looks.

This is one holding that didn't work out as planned for me.

Spekulatius

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Re: RR - Rolls-Royce
« Reply #305 on: July 30, 2020, 02:41:59 PM »
I agree that rights offerings are more shareholder friendly. One issue though is that often foreign shareholders canít participate due to legal or technical barriers. I think ADR holders wonít be able to participate for example.
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rb

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Re: RR - Rolls-Royce
« Reply #306 on: July 30, 2020, 03:23:02 PM »
yea, there are some points in there, but RR doesn't really have a huge ADR. So yeah, it's weird they didn't do rights.

NotSoWise

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Re: RR - Rolls-Royce
« Reply #307 on: August 03, 2020, 03:09:38 AM »
With the current price at GBP 2,13 its interesting to see what RR will do in Sep. If they proceed with GBP 1-1.5bn RI at a price of GBP 1.0 or 1.5 per share (assuming more share price fall) then it means they are in super deep hole without any options and all its PR about good liquidity is BS. Fair to say, IR said "current" liquidity, not long term.
Taking IB advisors (3 of them) usually means they are pretty serious about RI and saying "we consider options" usually means we work on RI. But will they pull the trigger at GBP 1 per share?

Interesting bit is the Spanish business - can they sell it and at what price. After signing, would they still proceed with RI? A lot will depend on when the long flights will pick up and to what degree, which is unknown at the moment.

Do you guys have any numbers what % of flights are we at the moment?




Spekulatius

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Re: RR - Rolls-Royce
« Reply #308 on: August 03, 2020, 04:02:48 AM »
With the current price at GBP 2,13 its interesting to see what RR will do in Sep. If they proceed with GBP 1-1.5bn RI at a price of GBP 1.0 or 1.5 per share (assuming more share price fall) then it means they are in super deep hole without any options and all its PR about good liquidity is BS. Fair to say, IR said "current" liquidity, not long term.
Taking IB advisors (3 of them) usually means they are pretty serious about RI and saying "we consider options" usually means we work on RI. But will they pull the trigger at GBP 1 per share?

Interesting bit is the Spanish business - can they sell it and at what price. After signing, would they still proceed with RI? A lot will depend on when the long flights will pick up and to what degree, which is unknown at the moment.

Do you guys have any numbers what % of flights are we at the moment?

PR around ďour liquidity is strongĒ is almost always BS, because in most cases, solvency is the issue, not near term liquidity. The way RR business is structured (depending on LT contracts and viability), they canít  afford to have junk credit, as they need the trust of their customers and access to capital markets. It is what it is, the capital raise will take place regardless of price.

Thatís one of the issues with rights issues - they can take a long time and the stock can get into a death spiral in the meantime. This happened with the Brit banks too post GFC.
Life is too short for cheap beer and wine.

aryadhana

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Re: RR - Rolls-Royce
« Reply #309 on: August 03, 2020, 05:29:59 AM »
Do you guys have any numbers what % of flights are we at the moment?

I don't have the numbers atm, but worth pointing out that the % of flights number is much, much better than the (much more frequently cited) % of passengers number.