Just One Story Of How New Shares Can Be Managed

[YankeeCanary 0]

If someone was looking to acquire NCFC through the issuance of new shares I wonder if they would be able to pull the rug out from under existing shareholders the way that General Motors are planning on undertaking with their existing shareholders. If it were possible for anyone acquiring NCFC to apply such a scheme one would think they would not be viewed favourably by all of the fans who were shareholders. Now the fans who either were not shareholders or had little to lose, well, they might have an entirely different attitude. 

 

DETROIT (Reuters) - General Motors Corp on Tuesday May 5th detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM''s shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM''s stock investors with just 1 percent of the equity in a restructured automaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed on Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM''s restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM''s existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

The automaker said it expected to draw another $2.6 billion from the U.S. Treasury before a June 1 deadline set by the Obama administration for it to reach agreements with all of its key stakeholders.

That borrowing would take GM''s debt to the U.S. government to $18 billion, and the automaker said it expected to have to borrow a total of nearly $27 billion.

[Canary Wundaboy 1,423]

You''re missing the obvious Yankee.Who issues the new shares? The owners.Is Delia likely to issue loads of new shares for someone to buy up and dilute her shareholding? Nope.

[PurpleCanary 6,386]

Yankee, the point about that GM plan is that people might be willing to buy those new shares because they''re listed on a stock market, and might eventually gain in value.Norwich City is an unlisted plc, with its shares really having only a nominal value. Of course that might change in the future (Chase mused about listing the company) but I''d be a touch surprised if anyone was thinking about such an idea at the moment.

[YankeeCanary 0]

[quote user="Canary Wundaboy"]You''re missing the obvious Yankee.
Who issues the new shares? The owners.
Is Delia likely to issue loads of new shares for someone to buy up and dilute her shareholding? Nope.
[/quote]

Precisely! Of course she wouldn''t. Don''t think I''m missing anything Wundaboy.

[spudgfsh 0]

[quote user="YankeeCanary"]Precisely! Of course she wouldn''t. Don''t think I''m missing anything Wundaboy. [/quote]

That was the problem Cullum had, he wanted to invest £20M but Delia stated that it''d have to be new shares in the club.  (hence the £56M valuation the board reported)

[YankeeCanary 0]

[quote user="spudgfsh"]

[quote user="YankeeCanary"]Precisely! Of course she wouldn''t. Don''t think I''m missing anything Wundaboy. [/quote]

That was the problem Cullum had, he wanted to invest £20M but Delia stated that it''d have to be new shares in the club.  (hence the £56M valuation the board reported)

[/quote]

No, that''s wrong.

[PurpleCanary 6,386]

That is indeed wrong. The club''s statement indicated, without stating it categorically, that it wanted Cullum to buy existing shares. Cullum himself said publicly he had no intention of buying existing shares. Which could only mean he wanted to acquire new shares.

[spudgfsh 0]

[quote user="PurpleCanary"]That is indeed wrong. The club''s statement indicated, without stating it categorically, that it wanted Cullum to buy existing shares. Cullum himself said publicly he had no intention of buying existing shares. Which could only mean he wanted to acquire new shares.[/quote]

But the rules of the city of london for publicly owned companies states that if someone buys over 25% of a companies shares then they would HAVE to make an offer for all of them.  Cullum wanted a controlling stake (51%) of the club for his new shares .  It wasn''t Delia forcing him to buy those shares it was the city of london.