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ING Groep N.V. Message Board

  • srinivasiyer srinivasiyer Dec 2, 2009 5:30 PM Flag

    ING Current price calculation due to rights issue.

    http://www.reuters.com/article/marketsNews/idCNGEE5AQ05G20091127?rpc=44

    NUMBERS * Issue price per share of 4.24 euros * Offer is 6 shares for every 7 held * Issue price represents a discount of 52.4 percent to Nov.
    26 close of 8.916 euros * 37.3 percent discount to the theoretical ex-rights price * 1.768 billion new shares to be issued, on top of over 2

    Lets say you had 700 shares at the closing of Nov/26/2009

    700 shares @ 12.25 (closing price on nov/26/09) = 700 * 12.25 = $8575.00


    You get rights to buy 600 shares @12.25*.524 due to rights issue = 600*12.25*.524 = $3851.40

    If you excercise the right, you own

    Total price for 1300 shares = $8575.00 + $3851.40
    = $12426.4


    Now, price per share = 12416.4 / 1300 = 9.55876923


    The current price fluctuates around this price due to some arbitrage in cuurency exchange

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Is all this worth the hassel..Come sell there will be brokerage, Tax and currency adjustment..all for a pittance.
      seriously leaving this alone..however we are open to alternative views.

    • Thanks for the helpful post, Srin.

      Is this statement a reasonable summary?
      Every shareholder's stock will be diluted, but those with a right to buy at $6.42
      should do it if the ex-rights price is higher than $6.42? (And it is currently above $9)

      • 1 Reply to jmulcahy7
      • NO,
        Srin's calculation is wrong, it is not correct for the ADS's.
        His formula is correct, but he has to take into account the closing price on 11/23, not the 11/25! This is exteremely important fact:
        the ex-rights date was set up retoroactively on 11/24 , obviously ING completely messed up this rights issues and will have poblems with SEC!
        Assuming subscription price $7.06 and taking the 23rd closing price of $14.26 you can easilly calculate theoretical ex-rights price of approx. $10.94. So if we are about $2 below $10.94 market tells us that we have a bearish mood here, of course this is just short term trend due to the offering. I suspect many investors will not exercise their rights simply becuase the price is so much below the theoretical ex-rights price right now. Long term(perhaps in Spring 2010) I do see this stock going back to at least the $15 level.

    • Srin, there are three big ticket items missing from your calculation:

      1. The share price softened from around $15.00 to $12.25 in the immdiate run up to the rights issue announcement.

      2. Before the stock commenced the softening into the rights issue run-in, the stock was around $19. It fell from this $19 level because of worries about forced asset sell-off related to Dutch Govt finncial bail out. Because ING will use the rights issue money to repay big chunk of the Dutch Govt money the future scope of forced asset sales is dramatically reduced.

      3. Economic recovery continues worldwide, albeit at a moderate pace. Consequently shares of major banks have been advancing this past couple of weeks. But again, due to the rights issue overhang, ING's stock has been kept away from the party.

      Summary:
      When the rights issue is closed in mid December the stock price is very likely to be in the $12 range. This is an easy call.

    • Yes, for someone who bought the stock on 11/26 close, 9.55876923 will be the price of each share.
      The question is - what will be the market price be after the new shares are issued.
      ING's future earnings attributed to one share until 11/26 will, after 12/11, be attributed to up to 13/7 = 1.857 shares, depending on how many of the rights are exercised. This significant dilution is somewhat compensated by the reduction in interest payment to the government, but I am not sure how to figure it out. Anyone with suggestions?
      If the market will price ING on 11/12 with the same earnings expectation and P/E as on 11/26, we shall see a significant drop in share price. But maybe not - if the rights issue makes enough people believe ING's earnings will become much higher now. Some on this board have bullish sentiment - could you please explain why your expectation is for the price not to drop due to the dilution, and even increase ?

 
ING
14.83+0.02(+0.14%)Feb 27 4:02 PMEST

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