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Bank’s upcoming rights issues attract attention

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06/06/2008

Two-thirds of eligible TD Waterhouse investors have chosen to take advantage of the RBS rights issue announced last month.

The online share dealing site has revealed that 67% of TD Waterhouse retail investors that are eligible have decided to take up their rights to buy the extra shares offered by the bank. RBS announced the rights issue last month in a bid to generate £12bn in capital and it closed this morning.

However, a large number of TD Waterhouse users have traded their rights to buy the additional shares instead, according to Angus Rigby, chief executive of TD Waterhouse. “This has resulted in RBS Rights appearing as our number one sell for the week; although some of these trades can be attributed to ‘tail swallowing’ – in which a proportion of rights are sold to enable the shareholder raise money to exercise their remaining rights,” he explained.

Such a strategy could also play a key role in HBOS’s future rights issue, Rigby continued. However, he added: “The bank is offering private shareholders a free share dealing service, which is not available to certificated shareholders who wish to ‘tail-swallow’. Neither will HBOS guarantee that the price obtained through its free dealing service will match the price obtained by a non-HBOS broker, this could lead to some shareholders choosing to pay to trade through another broker in order to get market prices.”

Bradford & Bingley (B&B) also caught investors’ attention this week, Rigby added. The bank’s shares went south on Monday after it announced an £8m pre-tax loss in the first four months of 2008, compared to a £108m profit in the same period last year. B&B has called for more cash from investors via a rights issue and will also sell a quarter (23%) of the business to US private equity firm Texas Pacific Group

“Our retailer investors were split over the prospect of a cheap price and the long-term performance of the Britain’s biggest buy-to-let lender. B&B’s initial rights issue proposal at 82p has already been abandoned and replaced this week at a reduced price of 55p, and it remains to be seen how successful both HBOS and B&B will be at wringing money from their shareholders,” Rigby concluded.

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