Investment Forum - Trying To Learn !

Thank you for your reply,it was easy to understand.
The question was about nominal shares, issued at 1p.
My next question is as follows.The nominal shares were for sale at 42p on the 13th of January.Yesterday, the share price was 79p.
Excuse my ignorance,but does that mean anyone who bought the nominal shares on the 13th at 42p now have shares worth 79p ?
Also,why have the company decided to issue the 125,000 shares at 42p ?Why not at the going rate,possibly nearer 79p.

Many Thanks.

Cervantes

OK, without knowing the details of the issue and the history of the share price (prior to the fund raising) you are right. The issue was at 42p and the shares, now being 79p, thelucky placees are making a handsome profit (if, of course, there is liquidity). In simple terems it works a bit like this. The company management are looking to raise funds at the highest price possible. Their brokers are trying to get the shares away (raise the funds) as easily as possible. Let's say, therefore it is a bit of a compromise. The brokers need to float the shares at a discount to the fair value. One, this helps placing the shares and two, it makes it easier to raise money in the future if the placees are kept happy.
Of course in reality it may be a lot more complicated than that. What was the company?

Rockhopper Exploration.

OK, you are getting two things muddled up here. There was a placing in late October to raise £50m. This was done at a 16% discount to the then share price of 60p. If you look at the chart the price was 40p in early Sept. Looks like the price was pushed up to 95p in late Sept. and then dropped back to 60p (knowledge of the pending fundraising?).
Seperately there was an exercise of options (125000 shares) at 42p in January (when the share price was around 80p). These options would have been granted (probably to directors) way back when the share price was below 42p.They may have been issued at a price or given in lieu of salary or something.
These placings (like the £50m one) are predominantly done with institutions but individuals can get shares if they know the house broker, or their broker has a relationship with the house broker.

Thank you, once again.As I am on a learning curve,I dont have any kind of broker.However,I do know how to open a share dealing account with my local high st bank.
You mention house broker,I presume he acts for the company whose shares I maybe interested in ?
Does that mean he can choose who he sells to ?
Finally, throughout your excellent site,there is plenty of warning to only gamble what you can afford to lose.Should I risk 3K as I have to start somewhere.
That is if they are available.
Cervantes

It will be difficult if you don't have a broker. Personally I don't like on-line, Banks,building socities etc. as brokers. The house broker is the broker to the company, or in the case of AIM, the NOMAD as well. Basically the HB will have a list of clients (mainly high net worth, who are interested in placings). It may be tricky to get on a list because of the present compliance regs. A lot of placings are AIM and you need to be in the high risk category. You need to know the main brokers who do the majority of smaller company placings, like Collin Stewart, Cenkos, Astaire, Teathers etc. etc. Other brokers have relationships with these brokers and can usually get stock. Obviously the really good issues are quickly snapped up by the HB's own institutional and private clients.
If you are gambling or speculating rather than med/long term investing you should only risk what you are prepared to lose.

Looks as if I am out of my depth although I would be happy with Med/long term.Originally considered buying RBS,what do you think.

It's a big gamble. It is the weekest UK bank and there is so much uncertantity surrounding the UK banks in general.

Thanks very much , again. Looks like it`s back to the drawing board for me.

Cervantes.

Can you explain Bid price and Offer price.

Many Thanks.

Cervantes

BId and Ask (or Offer). This may be slightly confusing because there are two systems of dealing on the LSE. One is Market Driven and the other is Order Driven (SETS). In Market Driven it is the Market Makers (MM) who make the price. Therefore they are bidding for stock at the lower price and offering stock at the higher price. You, as a trader would be selling to their bid and buying from their offer.The difference is called the Jobber's (or Market Maker's) turn. If their are several MMs in the same stock they will be quoting slightly different prices (maybe). The best bid and the cheapest offer between them is known as 'the Touch'.
With Order Driven stocks it is the orders that are put onto the order book that make up the bid & offer. If you are a trader it looks the same at first: the lower price (the bid) is the price at which you can sell stock and the higher price (the Ask or Offer) is the price at which you can buy stock.
But let's say you, the trader, want to buy stock. If it was reasonably liquid (lots of trades) you could put your order into the system (the order book)on or just above the current bid (but below the Ask). The next order to sell at best (or your bid price) would be matched with your order. Hope that is clear!

Thanks for your help.I will have to read this a few times to fully understand.Have done plenty of research in the last couple of weeks and now almost have a share dealing account with my local bank.I am just waiting for them to send me the account number through the post.
Many Thanks
Cervantes.

I didn't want to make it too complicated but there is usually more than just a simple answer!
The basic answer is the bid/ask is coming from the market's view point. The 'market' is bidding and asking a price. There are two-way prices, as you know (buy/sell). So the broker's client (or whoever) would buy at the ask and sell to the bid.
Always remember that you buy at a higher price than you sell (otherwise if it was the other way around you could make an instant profit!)

It has taken a bit of time for the penny to drop, but I now completely understand.
Hopefully, not long to go.
Thank you.
Cervantes.

I am unsure whether to just buy stock or go and buy a share ISA. When I look into share ISA`s they look complicated.I am particularly worried when I see the word "charges". The word is everywhere.Initial charges,annual charges.It makes me think of the horror stories in the Daily Mail.Do you think I would be better off going on my own with few charges ?