I have two questions regarding Ch. 6 of the Combined Material Pack (CMP) to ask. Firstly, can placing be used in shares issues to existing and new shareholders? Moreover, I think there is a problem in the solution for question 6.6. I think the number of new shares issued should be 100M instead of 600M; whereas the nominal value of new shares should be 25M instead of 150M. Cash raised should be 70M as stated by the question. So, shouldn't the current assets be increased by 70M; the reserves be increased by 45M and 25p ordinary shares be increased by 25M? Thanks for your clarification.
Re: Placing A placing can be used to issue shares to new shareholders (ie as the first public issue of shares), and can be used instead of a rights issue (ie to issue additional capital). The existing shareholders would have to waive their pre-emptive rights to the shares to allow a placing. Re 6.6 I think the solution is correct - let me know why you think only 100m new shares are issued .... The company has £150m of share capital at 25p nominal, so 600m (=150/.25) shares in issue. The issue is 1 new for 1 old, so 600m new shares issued.
Re 6.6 Sorry, I thought Q6.6 talks about the situation at the bottom of page 19. By the way, how do we know the cash raised is 900M pounds?
It's a 1 for 1 issue. 1 new share for each existing one, ie 600m new ones for 600m existing. All at 25p nominal. So, if the existing nominal is £150m, we issue £150m new.
Then we would only issue 2/5*600m=240m new shares at 25p nominal. If you want to work through the calculations and post them, I'd be happy to check them for you.
