what is the good or the bad news, page-19

For a quick lesson in Rights trading, and what can potentially happen post-Rights, I suggest that you take a look at the Ericsson Rights Issue of 2002.

This particular issue was done on a 1:1 basis, @3.8 SEK, and raised $6.0B.

At the time of being announced, the share price was ~8 SEK. The share price did fall away somewhat (due to the steepness of the discount involved) and bottomed out @ 3.3 - 4.2 SEK over a 10 day period, post-Rights (ie: 20 -30/9).

Since then, the share price has risen to 10 SEK, and fallen back to 7 SEK, due to end of year tax loss selling (Sweden's tax year ends 31/12).

Currently, however, the share price is trading @80% above the Rights issue price.

What does this mean for TMS?

Chances are, nothing.

But, just as the Ericsson Rights Issue was publicly supported by its major investors, the TMS Rights Issue is being backed by its major investors.

Both issues involved dilution (or a steeper than normally anticipated discount to market).

Both issues involved a business which was incurring losses, or divesting non-core business, at the time.

So, all things being equal, 3 months post Rights for TMS, the share price should be 4.5c (or better), working off a 2.5c Rights base.

Using a current shareholding of 100,000 shares as an example, an additional 250,000 shares would be allocated under the Rights.

Aggregating these together, an overall investment of $13,500 would conceivably increase in value to $15,750 (based on the current close), and ~$23,000, based on the recent Ericsson peak of 10 SEK.

However, before everyone waits to take the Rights' entitlements on trading, the same situation occurred for Ericsson, with the Rights trading at between 2.5 and 4 SEK (ie: 66% and 100% of Rights value). In other words, unlike last year's HTA Convertible Notes offering, the Ericsson Rights were worth ~70% of Rights value (on a weighted average basis).

In TMS' case, this could equate to ~1.8 -2c.

These comparisons are merely for purposes of illustration.

They seek to answer the riddle posed by Liam, as to whether the USA Val Morgan exit was the most profitable part of the business sold out "cheaply" by TMS, or whether the dilutionary impact of the forthcoming Rights Issue means that PBL and TEN are effectively increasing their stake in TMS without a takeover premium in place.

Hard to say, but based on current trading, the TMS share price is being reduced for some reason (presumably given the potential trading value of the Rights).

But, as for the future, I guess that it all depends on whether you use comparisons for your guidance, or whether you try to do some revised valuations based on the "profitable" and "retaianed" Global TV business.