Mr. MBY, Most people on this board owned LYG before the HBOS deal and thought it was a good investment for reasons unrelated to HBOS. If HBOS is such a great deal why was it about to implode? LYG's dividend will be "rebased" next year(reduced), they are are increasing capital ratio(dilution) and buying mortgages on property whose value is decling. The stock was plunging until a temporary ban on shorting was put in place. Would you or someone else please provide opinion backed by facts and figures to make me believe HBOS is a good deal? Enjoy your posts. Thanks.
Thanks carchandco5. I will answer your questions as well as I can.First some background.I am a recent investor in LYG. I have had my eye on the company- following the news, growth , dividends, etc for seven years. I became interested in UK based banks when HSBC first listed as an ADR and have been an owner of that company since 1999. On Feb.11th of this year i made my largest dollar purchase of HSBC since my first purchase. I have never sold a share. I have bought HSBC in the $90/range and the $50/range. I would nimble (100 share lots ) at high prices and gobble ( 1000 share lots ) at lows. I would say that HSBC has been an outstanding investment. I have purchased LLoyds twice now. First at $22.05 and then at $18. My average is now $20.025/ADR. i think this will turn out o be an investment that my grandchildren will thank me for. I am a dividend investor. I invest for income. I do not trade. In fact you could count the number of times I buy or sell in a given year on one hand. I invest for safety and dividend growth. Lloyds delivers both. As I read the particulars of the HBOS takeover the next dividend ADR holders will receive is approximately $1.95 in cash. The dividend immediately following will be in new shares then all subsequent dividends will be in cash, unless the shareholder chooses otherwise.
The morning the HBOS was mentioned LYG shot up on the LSE about 20%. When the NYSE opened the hedge fund shorts got to work. These folks were taking advantage of a loop hole that allowed them to make bets on the stocks movement with no vested interest. And claiming that they would deliver the stock ( so they would have to buy shares ) should they bet wrong but being able to get away with not doing so if the shares plummeted. It was mass thievery and it worked. That is until regulators said enough is enough. It was quite similar to the sub-prime no-doc loans and came from the same mentality. Lies based on greed. Folks saying they could afford a mortgage of X when the couldn't and had no intention of paying ever. The used their home loans for speculation and when the bottom fell out they could care less. Some folks were sincere and took loans ill advisedly. Most I think were people who thought they could make free money with no risk.The huge short positions taken by hedge funds is something new. technology allowing then=m to do this is new. When Lloyds stock jumped it was because investors new the deal was good. Lloyds had been looking at HBOS for years. Regulators wouldn't allow a merger. Too high an economic concentration and market dominance would occur. They changes their minds and Lloyds has made the deal of the century.The Brits never followed the " no doc " policy of the USA banks. UK banks exposure to sub-prime was in the paper they bought not in the mortgages they originated. the " rating agencies " said " hey guys its triple A " when obviously it wasn't. They didn't understand what they were rating. The dramatic drop in share prices of some financials were not because the business' were bad or insolvent. The drop was do to exploitation and thievery plain and simple. Lloyds got HBOS and a huge bargain price. It will now dominate deposit based banking in the UK. That is what all the financials are looking for . Most of the folks who have mortgages who live in their homes will want to sat and pay even if their home values drop. That is my view. The share LLoyds is selling today are " shelf registered". In other words they were counted and considered in all ratios prior to sale. they have been sitting on the shelf so to speak. Management wanted to raise some cash and this was the easiest non-dilutive way to do it. I agree. Buffett says " never do business with someone you wouldn't want your sister to marry. " In other words no matter how smart you are or how good your analysis you ultimately have to rely on the mangers of your company to do right by its shareholders. I have read and observed enough of Lloyds management to think that is true. Otherwise I wouldn't have invested.Sorry for being long winded. This is my last post for the day. I have to get ready for the Sabbath and will see how things workout on Sunday.Thank you for your excellent questions and your kind words. have a great weekend everybody.Menachem ps- My only regret is I couldn't buy more!
I though the "next" dividend in cash was the one for which the ex-div date has already passed and payment is in October. I took it to mean the next undeclared dividend in early 2009 will be all stock.
I am no expert and could be wrong, but with the strong sell from S&P, the negative perception of the new issue (perhaps incorrectly negative), the risk on the merger, and the end of short covering, this one will be rather static for awhile. However, who knows how much rally is left. Good luck!