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 ?

Ok, a few basics. An ISA is just a wrapper, a tax efficient wrapper. There is some management or administration (like making the returns to HMRC)involved for which someone will want to charge. Moving on, there are two types of Srocks & Share ISA. One is an investment fund wrapped in an ISA and the other is a normal broking account where the shares purchased are wrapped in an ISA. In the first one you will see there is a possibility for the bank or managers to charge two lots of fees. 1.For running the Investment fund itself and 2. For administering the ISA. You will probably find these charges (hidden) are fairly high and the performance not necessarily comparable (look up investors' comments re Virgin Share ISA). Furthermore the tax savings are unlikely to compensate for the charges unless you are high rate or putting the max amount in every year and sheltering your gains from CGT.
If you are just punting with a fairly small amount of money I would think a cheap online broker would be the best bet. If you have larger sums available then try and find a good stockbroker (get a list from the Chartered Institute for Securities & Investment (CISI))
Otherwise get reading! Investors Chronicle, Shares Magazine, Financial Press, Internet etc.

Thank you,I will certainly buy one of the mags that you mention.Also, you mention a cheap online broker.
I am waiting for HBOS to confirm a share dealing account.Is this the same thing ?
If it is, will I then be able to buy whatever I want ?
I don`t want to be paying money to banks and fund managers if I can help it.I have about 12k to invest.

Not sure about HBOS. They have to have a dealing platform where you can input your own trades. Also you have to decide whether you are gong to be an investor or a trader. Or a bit of both. Don't do anything rash. You have a steep learning curve. Read but don't take anything at face value-read between the lines. Keep posting. Let us know your progress. It would be good to publish your progresss on the website!

Many thanks, I look forward to posting any progress.
Have spent about a month trying to educate myself.Should have started years ago,but never got beyond the Daily Mail.Will have to go to the bank tomorrow and find out what is delaying my new account.

Update !
I now have my HBOS share dealing account.After waiting two weeks,I went to my branch and after a phone conversation,I was given my account number.I wonder how long it would have taken if I had not gone to see them.It took them only TWO days to take the minimum £100 from my other account.That two weeks may have cost me a fortune(LOL).
Next step is to figure out the workings of the account.Not as simple as they tell you on line.
Cervantes.

Update !
Now have share dealing account in place.Have been messed about, but all is now well.
If I bought shares tomorrow,will I get a share certificate? Who will send the certificate ?
Basically, I need to know how I have proof of ownership.

Well done!
I don't know the details of Halifax account, but presumably you filled in an application form and received their T&Cs? I would imagine it would be a nominee account, where your shares are held in their nominees (Crest account). But you could also have the choice of having paper certificates. It is easier to deal paperless (nominees) as you can sell T+3. Let me/us know.

Now entering the unknown !
I am tempted to buy a very small amount just to see the wheels in motion.Previously, I mentioned Rockhopper oil.I got the impression you were not impressed.Today, I saw as little as 100 shares traded.In the last 15 minutes,half a million were traded.Does this tell us anything and what do you think ?

Further Into The Unknown !
Through my new share dealing account,I have applied to but £1050 worth of shares in RBS.I applied to buy 3000,but because the Stock Market is closed,I had to put a price down.There will be very little difference.
I had the option of inserting a limit,which I declined.It may be against better judgement,but I wanted to see how the whole thing worked.
Also,if I woke up tomorrow and lost the lot,it would not be the end of the world.
It looks as if I will always have to deal this way as I am at work all day.
It may only be a boring drop in the ocean,but opinions would be most welcome and I have enjoyed it.
More to follow ?
Cervantes.

I was going to say if you fancy Rockhopper then have a go. But don't just guess and hope at tis! I hope you have read as much as you can about Rockhopper (and, indeed the Falklands). Also don't try and read too much into the recent trades. If you can see all the day's trades then you might be persuaded by, for example lots of trades in the 25000-50000 range. This might indicate a bit of professional buying (nosey buying). Problem is with SETs every trade is a buy and a sell--look at the MM trades (not marked AT). A lot of bargains have 'conditions' on them. Like EB, Broker to broker, agency cross etc. I don't think there is a necessity now of actually reporting the condition (post MIFID). The bargain yo mention was traded at 16.54 (marked b) and you will notice there were two trades just before of 164629 and 100000 all after hours, so it would seem they are all 'connected'.
But as I say don'tget too bogged down in detail.
Is the stock likely to rise? Why do I think that? What effect will the whole market have on my analysis? Etc.

With the greatest of respect,your answer is too complicated for a beginner like me.
I don`t understand quite a few of the abrievations.
I have read all I can about the Faulklands.
Your advice about spending no more than you can afford to lose always rings in my ears.
At the end of the day,If I make a fraction more than bank interest, I will be happy.
My RBS shares are in for the long term.

Sorry about that!
It's just that you mentioned some trades and a lot of people do but unless you know (or at least aware of) all the facts it's not worth bothering about.
About dealing or putting trades on before the open. The market does take a little time at the open to settle down and you can get what people call gapping (the price opens at a completely different price than that at what it closed). So you can do as you have done (put in a limit) oer wait a few minutes until the 'right' price is established.

Can you kindly explain Dividends/ Ex-Dividends. From what I have tried to learn on-line, it sounds too good to be true.Example;ex-dividend 24/2/2010.Surely it is not possible to buy on the 23rd and qualify for the "full monty ". As I said, too good to be true ?
Cervantes.

Well you have to bear in mind that when the stock goes Ex. it loses the dividend value in the share price. Of course sometimes it regains the dividend, in the price over a short time. But you are right in your assumption.
Also be aware that when the stock goes Ex. Div. you can trade it 'Spec Cum Div.' until the dividend is paid. So you buy a few days before the Ex. date, wait until it goes Ex. and, hopefully the price regains the dividend amount and then sell special cum div. You may make a capital gain out of the dividend.

Cervantes, where applicable can you start a new thread for a new question (ie a new thread entitled "explain Dividends/ Ex-Dividends").

The only reason that I ask is that it makes these questions/answers easier to find, and also the more new topics we start, the more it will help Shareworld in the search engines!!

I quite agree, sorry. Will start a new thread.