"sounds like agood deal if the current prices is greater than 70 cents but kind off stupid if its lower or?" - NomadAUS
Yes very true Nomad. That is where when a company wants to raise funds through a rights issue it has to assess what is the best level to pitch it at.
Has to be made attractive in some way. So it is usually lower than the share price prior to the rights announcement so that there is an allowance for the decline in share value because there will be a dilution effect with more shares in the company after the Rights are converted. It also has to be low enough to attract people to take them up. Or, as in this case, there is an additional bonus to taking up the rights and converting them in that you are given another set of options on a 1 for 1 or 1 for 2 or what ever basis.
With PRC the sp declined close to the rights price initially. Got down to about 72 cents I think after a day or two. But then it rose back up to close on 98 cents a few days ago but has droopped again to about mid 80's.
Forsyth Barr have just done a research paper on PRC and suggest that it has a valuation of about $1.00. So to be getting extra shares through converting at 70 cents seems to be a good punt.
I remember getting some extra shares some months ago when they raised extra funds with a rights issue at 90 cents. Then came the high prices being paid for coking coal at up to US$300 per ton. PRC shares climbed up to around $1.90 was it ? Certainly at the time my extra share I paid 90 cents for looked a very good decision.
They may be hoping / expecting that something positive will happen over the next year since the additional Rights you will gain from converting your present options will have a conversion value of $1.25 per option in late 2010.
That indicates that they hope the actual share price will be above $1.25 so that people will be willing to convert them into actual shares. Would need to be something like $1.35 or $1.40 to encourage people to do that.
Have to wait and see what happens by that time.
In the meantime you have to decide how many of your right s you are going to accept and front up with the funds before the offer closes.
PRC Price at posting:
64.8¢ Sentiment: Hold Disclosure: Held
