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Teacherman1 (49.44)

Lloyd's - Heads Up On New Share Issue.

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November 29, 2009 – Comments (2) | RELATED TICKERS: LYG

Just a heads up for nervous investors.

With the new capital raise through share offering for current stock holders (not ADR holders), things may get a little choppy in the shorter term, but in the longer run, it is very positive.

The "rump" has been approved and put into place. The ADR holders were not offered an opportunity to purchase new shares but should get some kind of cash payment from it. The amount is still unknown.

This same thing happened the last time they issued new shares. 

It is hard to tell exactly what effect this will have in the short term on the ADR holders when the old shares and new shares are merged together.

My personal feeling is that it will not be significant, but if you get nervous when you see a sudden drop, then maybe you will want to bail (if you have a profit), and buy back in later.

I myself will hold and wait to see what happens. If there is a significant drop, I will increase my position.

The raising of this new capital will have a very good long term effect, so if you are in for the long run, and don't get paniced by short term fluctuations, then I would say hold and add.

Do what you think is right for you.

JMO and worth exactly what I am charging for it. 

 

2 Comments – Post Your Own

#1) On November 30, 2009 at 6:36 PM, astroboy356 (28.36) wrote:

I have been following LYG as well as AIB and RBS for a few months now.  LYG's situation is a bit shaky but doesn't seem nearly as scary to me as RBS's situation (70% owned by the gov't).  I intend to maintain my position in all these banks (I have real money invested in them) for the long term, but I was wondering if you had any thoughts on the future of RBS.  I am having optimism troubles/doubts at the moment.

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#2) On December 02, 2009 at 8:18 PM, Teacherman1 (49.44) wrote:

As big of a Fool as I am for banks, I just can not get interested in RBS at this time. If it takes a big dip because of the supposed Dubai exposure, I might go in as a speculative play, but there are just too many unknowns at this time, not the least of which is the Govt. involvement. What happens is not just up to the UK Govt, but the EU has its hand in their future too.

I would think that RBS is similar to CITI, but at least I am in CITI at $2.99, and I do consider it as a spec play. Not because I think it is going out of business, but because as they wind down the CITI Holdings, and (probably) at some point leave CITI as a bank, they will need to raise a lot more capital. Not sure how this would affect the share price because they already have a lot of shares waiting to be issued, and would likely do a significant reverse splt to raise the share price dramatically, which would likely not leave them a lot of "run up" room.

RBS could be facing a similar fate.

Again, I have not spent a lot of time looking at or keeping up with RBS, but at the current price, I am just not interested.

Don't know if these comments are of any value to you, but if you have money in, and are underwater, you might as well sit with it. I don't think they are going bust, but just don't feel they are going boom either. 

You should be able to get your money out of it without a loss, over time, so no sense in throwing your investment away. 

JMO and worth exactly what I am charging for it. 

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