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RIO - Rio Tinto

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Unsure of the value of the buying in for rights issue for profit at present prices...

Say $10,000 shares purchased today @ $73 = ~137 shares

Entitlement: (3*21) + (0.525 * 17 = 9) = 72 shares x $28.29 = $2036.88

Total cost: $12,036.88 / 209 shares
Avg cost: $57.59

Every share is being diluted by 52.5% (21/40).. Ex-issue EPS will be ~65.5% of present. Effective trading price post issue therefore should be around $48 (0.655 x $73).. meaning avg buy price of $57.59 is poor. Anybody agree?

Can't see any large increase in profit in next 12 months, costs savings with BHP tie-in will take longer to carry through.
 

Holding all else equal... Rio is no longer selling itself cheaply to chinalco, plus its debt problems are partially relieved by the share issue, so I think if the current economic situation remains the same until post issue the price wouldn't be as low as $48. More like $57.59 because the market has already taken everything it knows into account.
 
Yes, agree that things are probably now factored into price.. but if this is so, buying to take up the rights issue (say buying this week) would not give you too much advantage. Different perspective if you were a longer-term holder.

EPS is forecast to be $4.363 for 09 .. post dilution eps could be around $2.858 .. $58 price (or thereabouts) would be a P/E ratio of 20, which already factors a bit of growth coming out of the GFC. Not much discount for a new holder.
 
Any possibility that Chinalco may not want to take up any of their rights and dump the whole lot on the market??

Since the deal is off would Chinalco still want to maintain their shareholding % in RIO?

Maybe they might want to move some of the money over to FMG?

If so what are the effects on RIO sp? Any thoughts?
 
I think the removal of the uncertainty factor makes it unlikely that RIO will trade below $50 ex issue unless the market as a whole takes a step back.
The BHP factor comes in to play again, probably not strongly at this stage but it should act as a bit of a buffer to any SP weakness.
As for Chinalco, they have their foot in the door now and I can't see them wanting to reduce their interest.
 
Sorry guys I've read through the last few pages and still can't find a final answer.

If I have no Rio shares now on what date do I need to buy so I qualify for 21 for 40 offer.

Cheers

From what I have seen it would appears as 11th June 7pm. That is for Rio Limited
Rio PLC (UK) it would appear 15th June COB.
 
naughtynickers said:
If I have no Rio shares now on what date do I need to buy so I qualify for 21 for 40 offer.
Click to expand...

abc_loveit said:
Hi all,
I am a new investor. My question is, if I buy RIO on Tuesday (9th of June), will I be entitled to the right issues, thanks,
Click to expand...
I've read through this thread and had a look at the RIO announcements and am still unsure about this. If we don't get an answer here I'll make a call to them tomorrow.
 
RIO shares are quoted ex rights in Aust on 17 June.

This means, to me, that you can buy them cum rights up to and including 16 June but ask your broker to be sure.
( A good clue will be when RIO shares drop from $70 something to $50 something on opening on 17 June!)

 
abc_loveit said:
Hi all,
I am a new investor. My question is, if I buy RIO on Tuesday (9th of June), will I be entitled to the right issues, thanks,
Click to expand...

The answer is "Yes".
RIO shares go ex rights from 17 June so if you bought today you are entitled to the issue.
 
bonkerrs said:
I've read through this thread and had a look at the RIO announcements and am still unsure about this. If we don't get an answer here I'll make a call to them tomorrow.
Click to expand...
Just called RIO. Can still participate if you bought shares today. As long as it is before the 22nd and make sure to include 3 days for settlement i that being said I guess no later then 17th... so, what Oldblue said.
 
bonkerrs said:
Just called RIO. Can still participate if you bought shares today. As long as it is before the 22nd and make sure to include 3 days for settlement i that being said I guess no later then 17th... so, what Oldblue said.
Click to expand...

As per Rio's June 5 announcement, the date and time to hold RIO shares and thereby qualify for the rights issue is close of business next Tuesday June 16.
 
Can anyone please explain what happens to current shareholders who dont buy extra shares under the rights issue? Do my current shares become diluted in value or do I automatically get issued with extra shares under this issue?

Thanks.

Paul
 
Can someone explain what I need to do to get involved with this offer. Do I just need to purchase a certain amount of shares? How many? When by?
 
Buy at least 40 RIO shares before the end of trade - 4pm on 16th.

You have to BPay or return a form stating the amount you want (within your entitlement).
 
a49002 said:
Can anyone please explain what happens to current shareholders who dont buy extra shares under the rights issue? Do my current shares become diluted in value or do I automatically get issued with extra shares under this issue?

Thanks.

Paul
Click to expand...

First, you won't get any extra shares unless you pay for them, ie, take up the rights.

You can, however, sell your rights and these should have a good value, theoretically at this point something like $28-$29, depending on supply and demand and all the others factors that make up share prices. If you sell your rights, you have, in theory, been compensated for the dilution in the value of your holding. Bear in mind though that you will pay brokerage on the sale of rights and that there is no brokerage on taking up a new issue.

 

Old Blue,

Thanks for taking the time to reply. That makes sense now as it has not been easy to get uncomplicated answers about this issue.

Paul
 
Based on what I read, if I buy RIO before 4pm 16th of June, I will be entitled to the 21 to 40 right issue. The ex-right date will be 17th June (and the record date is 22nd of June, T+3). Hope these are correct,
 
abc_loveit said:
Based on what I read, if I buy RIO before 4pm 16th of June, I will be entitled to the 21 to 40 right issue. The ex-right date will be 17th June (and the record date is 22nd of June, T+3). Hope these are correct,
Click to expand...

That's it.

If I was serious about buying the shares cum rights I don't think I'd leave it until the last minute unless I was happy to walk away if they suddenly got too expensive.

Alternatively, a strategy might be to buy the rights when/if they weaken under selling pressure. Again, I'd have to be prepared to forget it and move on to something else if this didn't happen.
 
Crikeys! They're that way now (expensive). I may still buy in?! Wanted to get in yesterday when it was low 68 but I "um'ed" about it for too long, now look at it! Still very green and uncertain about my trading.
 
I was wondering if it was possible to lock in profits with this rights issue.
If i bought 500 shares of rio on the 11th of June asuming t+3. Ill be eligble for tradeable rights which is listed on the 17th of june which should give 263 tradeable rights. Which i then sell on the market. If i hedge the position by shorting 500 shares of rio with CFD's would that be a definate profit? Quote me if im wrong.
 
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