RIO - Rio Tinto

oldblue · 17 June 2009

Hi Murray.

The shares were quoted ex rights today, ie anyone buying does so without getting the rights.

The delay in sending out entitlements is because yesterday's trades which were made cum rights, don't get settled until Friday, 19 June ( "T+3"). So the register isn't updated until after close of business on Friday.

murrayt · 17 June 2009

Thanks for that.
Another simple question (I'm Sure)
How does one now value a portfolio?
I'm trying to add extra function to my excel spread sheet to handle rights.

Lets assume I only hold 100 Rio Tinto Shares bought at $70.00
and 100 Rio Tinto Shares bought today at $58.00
In a few days I will get the rights and assuming the share price is still $58.00

This was my guess:

Code:

Qty    Tic         Buy             Price         Mkt  Val              Profit
100     RIO       $70.00           $58.00        $5800               -$1200 
100     RIO       $58.00           $58.00        $5800               $0
51      RIOR      $0               $28.29        $1640.82            $1648.82

however I'm now thinking the RIOR price will actually be close to the rio price less $28.29

Murray

eugene · 17 June 2009

jinx888 said:
Sometimes the price of the rights is overpriced. You can always sell the rights then buy the shares instead. You have to watch constantly, there was a pricing difference of around 50 cents at one stage, altho you have to be quick timed, not really worth it unless u have larger holdings.

Sometime around 9 July one RIO Right (RIOR) becomes one RIO share, right [sic!] ?

So I have two questions:

1: If you want further exposure to RIO in your portfolio, why would you not take up your rights as the cheapest means of doing so? Buying one RIO share means you pay nearly double for the end (9 July) result: one RIO share. (Moreover, you risk a loss if the current 57-58 price trades lower from 9 July onwards (in my mind a distinct possibility).

2: If you want further exposure to RIO (and have exhausted your opportunity under (1) above [sic!], or you don't currently hold and therefore have no rights to take up), why would you buy RIO at 57-58 instead of RIOR (until 24 June) at 29-30? Again given that 1 RIOR = 1 RIO at around 9 July.

eugene

skyQuake · 17 June 2009

eugene said:
Sometime around 9 July one RIO Right (RIOR) becomes one RIO share, right [sic!] ?

So I have two questions:

1: If you want further exposure to RIO in your portfolio, why would you not take up your rights as the cheapest means of doing so? Buying one RIO share means you pay nearly double for the end (9 July) result: one RIO share. (Moreover, you risk a loss if the current 57-58 price trades lower from 9 July onwards (in my mind a distinct possibility).

2: If you want further exposure to RIO (and have exhausted your opportunity under (1) above [sic!], or you don't currently hold and therefore have no rights to take up), why would you buy RIO at 57-58 instead of RIOR (until 24 June) at 29-30? Again given that 1 RIOR = 1 RIO at around 9 July.

eugene

Because the RIOR is like an option, its not a proper rio share. To simplify, Its the ability to buy rio @ $28.29.

oldblue · 17 June 2009

murrayt said:
Thanks for that.
Another simple question (I'm Sure)
How does one now value a portfolio?
I'm trying to add extra function to my excel spread sheet to handle rights.

Lets assume I only hold 100 Rio Tinto Shares bought at $70.00
and 100 Rio Tinto Shares bought today at $58.00
In a few days I will get the rights and assuming the share price is still $58.00

This was my guess:

Code:

Qty Tic Buy Price Mkt Val Profit 100 RIO $70.00 $58.00 $5800 -$1200 100 RIO $58.00 $58.00 $5800 $0 51 RIOR $0 $28.29 $1640.82 $1648.82

however I'm now thinking the RIOR price will actually be close to the rio price less $28.29

Murray

I would do it by getting an average cost over your total RIO holding, ie the shares bought cum rights plus the application money for the rights taken up plus the shares bought ex rights. Unless you've sold any shares ex rights you don't have a realised profit, just a paper one.
At this stage you can assume that you've paid the application money - although you havn't - for purposes of calculating your paper profit at any time. Once the new shares are paid up they will rank equally with the old ones so there will be no price difference.

oldblue · 17 June 2009

eugene said:
Sometime around 9 July one RIO Right (RIOR) becomes one RIO share, right [sic!] ?

So I have two questions:

1: If you want further exposure to RIO in your portfolio, why would you not take up your rights as the cheapest means of doing so? Buying one RIO share means you pay nearly double for the end (9 July) result: one RIO share. (Moreover, you risk a loss if the current 57-58 price trades lower from 9 July onwards (in my mind a distinct possibility).

2: If you want further exposure to RIO (and have exhausted your opportunity under (1) above [sic!], or you don't currently hold and therefore have no rights to take up), why would you buy RIO at 57-58 instead of RIOR (until 24 June) at 29-30? Again given that 1 RIOR = 1 RIO at around 9 July.

eugene

1 RIOR won't equal 1 RIO unless the buyer of the RIOR also pays $28.29c to the company.
The reason for buying RIO cum issue was to avoid having to buy RIOR on market. It's a bit confusing because the RIOR market price is very close to the application price of $28.29c but that's just a coincidence!

murrayt · 17 June 2009

oldblue said:
I would do it by getting an average cost over your total RIO holding, ie the shares bought cum rights plus the application money for the rights taken up plus the shares bought ex rights. Unless you've sold any shares ex rights you don't have a realised profit, just a paper one.
At this stage you can assume that you've paid the application money - although you havn't - for purposes of calculating your paper profit at any time. Once the new shares are paid up they will rank equally with the old ones so there will be no price difference.

Thanks oldblue. I will take up the rights...if all looks well for them at the time.

regards

Murray.................................................................

oldblue · 17 June 2009

murrayt said:
Thanks oldblue. I will take up the rights...if all looks well for them at the time.

regards

Murray.................................................................

I'm sure you're on to this but whatever you do don't let the rights lapse! They are very valuable and only trade until 24 June so you don't have a lot of time to decide whether to take them up or sell them.

lianeisme · 17 June 2009

Help me please I'm confused but I guess a lot of people are.
why would you pay $31.00 to by a right to buy a share at $28.29 when you could have bought a full share for less on the trading market today. I'm only new to this but is there some reason people do this? that I don't understand. Are there people out there buying these rights thinking they have bought a whole share like the mum and dad investors ?

oldblue · 17 June 2009

lianeisme said:
Help me please I'm confused but I guess a lot of people are.
why would you pay $31.00 to by a right to buy a share at $28.29 when you could have bought a full share for less on the trading market today. I'm only new to this but is there some reason people do this? that I don't understand. Are there people out there buying these rights thinking they have bought a whole share like the mum and dad investors ?

No, I don't think so. It's just a dynamic market.

At one stage today someone paid $59.80 for the heads which is a theoretical rights equivalent of $31.51.
It's just supply and demand and the way that shareprices move around, particularly when rights trading is condensed into a short period as in this case. ( Trading ceases 24 June).

vincent191 · 17 June 2009

A lot of people are very confused. I am sure when the smoke clears we are going to hear a few screams.

Very, very simply if you have rights that you do not wish to take up....sell it. Like Oldblue has pointed out above they are very very valuable and worth around $30 each at the close of business today.

If you want to buy RIO shares and do not fully understand the situation go and buy the shares on the open market.

If in doubt RING YOUR BROKER !!!

RIOINUSA · 18 June 2009

Greetings to all .......

I hold shares of Rio on the NYSE listed as RTP and it's been on a great run for 6 months or so. The last several days it's dropped from $200 usd to 170 today or - (15%). This is the largest drop over this time period and the DOW seems to be correcting downward after a 30% recovery since March. The fall in RIO price has outpaced this correction. All the news prior to the new rights issue seemed to bolster the price, especially the canning of the Chinese deal and the joint venture with BHP. I am more than nervous but want to hold because I think RIO a great company. All I can gather from RIO investor website is that the rights issue will not be offered in the US but they may consider a compensation at a later date.

I'm asking for some insight from any of you on what you think the stock "should do" on NYSE as it doesn't seem to completely react the way one would expect. I was looking eventually for a price above $300 at "full economic recovery" if and when that ever happens. Do you think the current 4 day drop is just American investors trading down on "news" and reacting as they would to a US company issuing a secondary stock offer? Or is the market discounting the price and should I expect it to adjust at a 40% reduction?

Sorry to be long winded, just wanted as much "what the hell?" in here as possible.

Cheers, Scott

oldblue · 18 June 2009

The short answer is that RIO shares have dropped wherever they or their equivalent securities are traded, because they no longer have the valuable new issue rights attached to them.
Unfortunately, rules and laws don't allow RIO to offer the new issue to USA holders ( and those in a lot of other countries). But the securities price gets affected just the same because there is now going to be a lot more RIO stock around.
The good news is that the solution to RIO's problems, via the issue, has been well received and the company's future looks a lot brighter.

Just IMO.

zarfius · 18 June 2009

Hi guys

As many others are, I'm a bit confused.

I bought 24 x RIO shares @ $77 on 12 June. According to etrade my settle date was the 17th.

Firstly, did I make it. Am I entitled to the rights issue? And if so do I simply buy my share of RIOR (12 by my calculations). I've heard people mention that I can sell my rights, is this possible via etrade or do I have to do it some other way?

I'm trying to do my own research but I'm also freaking out because of the short time period.

gfresh · 18 June 2009

RIOINUSA said:
Sorry to be long winded, just wanted as much "what the hell?" in here as possible.

There was also some uncertain guidance on prices for iron ore sales issued at the same time they went ex.. Which would have negatively impacted the stock. They're selling 50% of their ore at spot on the spot market, and the spot price is currently below the contract price. This tends to indicate they are having trouble securing longer-term contracts at good prices which would give it some more stability at the moment (imho)

http://www.businessspectator.com.au...in-due-to-pricing-T3C4G?OpenDocument&src=srch

bonkerrs · 18 June 2009

Just waiting for the letter from RIO to arrive in the mail so I can subscribe for my entitlement to the 28.29 per shares offer. I guess this will happen soon after Monday (22nd June).

oldblue · 18 June 2009

zarfius said:
Hi guys

As many others are, I'm a bit confused.

I bought 24 x RIO shares @ $77 on 12 June. According to etrade my settle date was the 17th.

Firstly, did I make it. Am I entitled to the rights issue? And if so do I simply buy my share of RIOR (12 by mycalculations). I've heard people mention that I can sell my rights, is this possible via etrade or do I have to do it some other way?

I'm trying to do my own research but I'm also freaking out because of the short time period.

If you bought on 12 June there is no doubt that you bought cum issue and are entitled to the rights.

Because RIO are sending out the entitlement letters in two groups, yours won't be posted until 26 June ( the first lot went out on 16 June ) but you have until 1 July to accept. Not a lot of time!

If however, you want to sell your rights you will need to do so by 24 June, ie before you get your letter!
You'll need to talk to your broker or etrade, whoever you bought the shares through.

bonkerrs · 18 June 2009

oldblue said:
Because RIO are sending out the entitlement letters in two groups, yours won't be posted until 26 June ( the first lot went out on 16 June ) but you have until 1 July to accept. Not a lot of time!

OK thanks! I will action it pretty quickly anyway so no worries with the short amount of time.

oldblue said:
If however, you want to sell your rights you will need to do so by 24 June, ie before you get your letter!
You'll need to talk to your broker or etrade, whoever you bought the shares through.

I didn't even consider this, so much talk about it in the last couple of pages here... sounds too complicated for me - happy to wait!

Binxx · 18 June 2009

oldblue said:
If you bought on 12 June there is no doubt that you bought cum issue and are entitled to the rights.

oldblue, I thought one must buy a minimum of 40 shares to be entitled to the 21 and these entitlement shares get rounded down. For eg, if you have 100 RIO on the applicable date then you are entitled to 52.52 = 52 shares

oldblue · 18 June 2009

Binxx said:
oldblue, I thought one must buy a minimum of 40 shares to be entitled to the 21 and these entitlement shares get rounded down. For eg, if you have 100 RIO on the applicable date then you are entitled to 52.52 = 52 shares

I understand that 21 for 40 is only the ratio and that it's the resultant fraction that gets rounded down.
But happy to be corrected on that. Has anyone received an entitlement from holding less than 40 shares? Bearing in mind that the first posting only went out on 16 June for those " on record" at 11 June.

RIO - Rio Tinto

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