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Shares from a capital raising: Do they affect SP immediately or at date of issue?

Discussion in 'Beginner's Lounge' started by egosbar, Sep 28, 2017.

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  1. egosbar

    egosbar

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    very new to trading
    a company has done a capital raise at 12% discount , the shares still went up 33 percent over the next two days , the capital is for more exploration drilling
    my question is they were announced yesterday and fully taken up ,but they will be issued on the 5th october , does the dilution of shares start when they are announced or when the shares are issued? Im worried on the 5th october there will be 270million more shares in the company and my share price will go down or are those shares already part of the company at the announcement yesterday?
     
  2. luutzu

    luutzu

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    Until the shares are issued, it's technically not issued yet :D I mean it's not diluted yet.

    But since the market is aware of the dilution, we can assume that they priced/valued the stock based on that future dilution next week. i.e. They have worked out how much the company is worth as a whole, say... then divvy it up into the new total shares outstanding on/after the 5th Oct.

    So unless there are no market manipulation, pump just to dump kind of games... those of faith in a fair and honest market would tell you the market is fully informed and the price wouldn't go down soon after the new issues. BUT....

    But chances are the price will go down soon after. Say a week or less.

    They'd go down for a few reasons.

    1. Those who take up the new issue at a 12% discount now have an extra 33% gain. That's a pretty good year's work for those lucky enough to get in. So chances are pretty good that they'd want to take some profit. More sells mean lower prices.

    2. With more shares outstanding, there are more shares being traded... Supply/Demand would suggest it'd cause the price to drop too.

    BUT... But that could just be a short term, a temporary market game people play.

    IF, and it's a big IF... If the company is sound, the new capital injection mean it could dig a few feet down or explore a new field then strike gold, or lithium. Who knows.

    btw, don't take what I say as advise or such alright. Just my opinions, and it's worth less than 2c.
     
  3. egosbar

    egosbar

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    thanks mate , thats how i thought it would work thats why i was surprised the share rose by 17% when they traded again after the capital raise , im thinking there may be some profit taking when issued add to that all the shareholders like myself also thinking the same thing will probably be selling as well , i think i might sell 50% and buy back in , if the price continues to rise ill take my profit and invest in another company if it goes down ill have more shares then originally with half cgt to pay.I will be paying 36% cgt so then i have to work out if thats worth it , profit at the moment is 7k in three weeks , if i take $3500 profit ill be buying back in for $3500 but owing tax on that amount end of financial year , is this a mistake to do that or the right strategy?
    my example if im understanding lets say shares at 6 cent current diluted to 4.5 cents and buy back in
    sell $3500 or 58333 shares @ 6c
    owe $1260 cgt
    buy back $3500 @ 4.5c = 77777 shares
    cost $1260 for 77777-58333 = 19444 shares but cgt paid on half of my shares

    is there a calculator that can do this type of maths for me
    is it worth selling half if this was the scenario

    sorry this share thing when cgt has to be thought about is pretty confusing lol
    there must be an easy way to understand strategy
    by the way thanks for your help mate much appreciated
     
  4. egosbar

    egosbar

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    oh by the way how do you keep track of shares that you still have to pay cgt on and ones you dont if you take some profit and sell and then buy back in multiple times
     
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