Friday, February 19, 2010
Economy Double Dip
This i have taken from seeking alpha website. From it one can make a small guess where our economy can head in coming days
Thursday, February 18, 2010
THE ZEN OF SARCASM
1. Do not walk behind me, for I may not lead. Do not walk ahead of me, for I may not follow. Do not walk beside me either. Just pretty much leave me alone.
2. The journey of a thousand miles begins with a broken fan belt and leaky tire.
3. It's always darkest before dawn. So if you're going to steal your neighbor's newspaper, that's the time to do it.
4. Don't be irreplaceable. If you can't be replaced, you can't be promoted.
5. Always remember that you're unique. Just like everyone else.
6. Never test the depth of the water with both feet.
7. If you think nobody cares if you're alive, try not filing your taxes.
8. Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away and you have their shoes.
9. If at first you don't succeed, skydiving is probably not for you.
10. Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.
11. If you lend someone $20 and never see that person again, it was a wise investment.
12 . If you tell the truth, you don't have to remember anything.
13. If you keep on doin' what you're doin', what you've got is all you'll ever get.
14. Everyone seems normal until you get to know them.
15. The safest way to double your money is to fold it in half and put it back in your pocket.
16. A closed mouth gathers no foot.
17. There are two theories about how to argue with women. Neither one works.
18. Nobody can talk and learn at the same time.
19. Experience is something you don't get until just after you need it.
20. Youth is wasted on the young.
2. The journey of a thousand miles begins with a broken fan belt and leaky tire.
3. It's always darkest before dawn. So if you're going to steal your neighbor's newspaper, that's the time to do it.
4. Don't be irreplaceable. If you can't be replaced, you can't be promoted.
5. Always remember that you're unique. Just like everyone else.
6. Never test the depth of the water with both feet.
7. If you think nobody cares if you're alive, try not filing your taxes.
8. Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away and you have their shoes.
9. If at first you don't succeed, skydiving is probably not for you.
10. Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.
11. If you lend someone $20 and never see that person again, it was a wise investment.
12 . If you tell the truth, you don't have to remember anything.
13. If you keep on doin' what you're doin', what you've got is all you'll ever get.
14. Everyone seems normal until you get to know them.
15. The safest way to double your money is to fold it in half and put it back in your pocket.
16. A closed mouth gathers no foot.
17. There are two theories about how to argue with women. Neither one works.
18. Nobody can talk and learn at the same time.
19. Experience is something you don't get until just after you need it.
20. Youth is wasted on the young.
Wednesday, February 17, 2010
Explaination of Rights Offerings
Here is the nice explanation on Rights Issue picked from a website
Rights Offerings
An often overlooked means of raising new capital is through a rights offerings or rights issuance. Rights issues occur when a firm sells new shares to those investors who have "rights." Rights give their holders the right to buy the new shares at the subscription price. To see how these work, an example is necessary.
The first step is to determine how much the firm needs to raise. For our example suppose a firm needs to raise $50 million dollars. Currently they have 22 million shares outstanding at a price of $25 a share. The next step is to determine a subscription price. The subscription price is the price at which the rights holders purchase the new shares. In this case let the subscription price be $15/share.
In the United States it is common to give a right for each share. So there will be 22 million rights granted. How many shares must you sell?
Number of new shares = (Amount you need to raise) / (subscription price)
So in this case:
$50,000,000/$15=3,333,334 new shares
How many rights will be needed to buy a single new share?
(Number of rights granted) / (Number of shares being sold)
22,000,000 / 3,333,334
6.6 rights / new share
The next logical question is what each right is worth. Unfortunately that is not quite as easy to answer. The first thing that must be done is to calculate the price of the stock after the issue and after the new shares have been sold. To do this we make some assumptions. Notably we assume that the everyone will exercise their rights (we can relax this later but it is generally a very good assumption), and more importantly that the investment opportunities will not change and further that the rights issuance does not change the operations of the firm. If this is true, then pricing is quite simple:
Overall equity value after issuance = Equity value before issuance + amount raised
= (shares * Price) + amount raised
= 22,000,000* $25 + $50,000,000
= $600,000,000
Total number of shares (post issuance)
Number of shares outstanding before the issuance + new shares issued
22,000,000 + 3,333,334
25,333,334
Price per share = new total market value / new number of shares
= $600,000,000 / 25,333,334
= $23.68
Now we can calculate the value of each right.
New price = subscription price + [(number of rights needed) * ( value of each right)]
$ 23.68 = $15.00 + [( 6.6) * (value of each right)]
Solve for the value of each right
Right = $1.315
Note that ex-right price plus value of right = old stock price.
23.68 + 1.315 = 24.995= $25.00
This can also be found by
Right price = (Old price - subscription price) / (number of rights per new share + 1)
=($25.00 - 15.00) / (6.6 + 1)
=($10.00)/(7.6)
= $1.315
If these rights are deemed as transferable, they can be sold on the secondary market. Most rights offerings involve transferable rights.
Link where we can get some more information
http://tutor2u.net/business/finance/finance_sources_equity_rights.asp
Rights Offerings
An often overlooked means of raising new capital is through a rights offerings or rights issuance. Rights issues occur when a firm sells new shares to those investors who have "rights." Rights give their holders the right to buy the new shares at the subscription price. To see how these work, an example is necessary.
The first step is to determine how much the firm needs to raise. For our example suppose a firm needs to raise $50 million dollars. Currently they have 22 million shares outstanding at a price of $25 a share. The next step is to determine a subscription price. The subscription price is the price at which the rights holders purchase the new shares. In this case let the subscription price be $15/share.
In the United States it is common to give a right for each share. So there will be 22 million rights granted. How many shares must you sell?
Number of new shares = (Amount you need to raise) / (subscription price)
So in this case:
$50,000,000/$15=3,333,334 new shares
How many rights will be needed to buy a single new share?
(Number of rights granted) / (Number of shares being sold)
22,000,000 / 3,333,334
6.6 rights / new share
The next logical question is what each right is worth. Unfortunately that is not quite as easy to answer. The first thing that must be done is to calculate the price of the stock after the issue and after the new shares have been sold. To do this we make some assumptions. Notably we assume that the everyone will exercise their rights (we can relax this later but it is generally a very good assumption), and more importantly that the investment opportunities will not change and further that the rights issuance does not change the operations of the firm. If this is true, then pricing is quite simple:
Overall equity value after issuance = Equity value before issuance + amount raised
= (shares * Price) + amount raised
= 22,000,000* $25 + $50,000,000
= $600,000,000
Total number of shares (post issuance)
Number of shares outstanding before the issuance + new shares issued
22,000,000 + 3,333,334
25,333,334
Price per share = new total market value / new number of shares
= $600,000,000 / 25,333,334
= $23.68
Now we can calculate the value of each right.
New price = subscription price + [(number of rights needed) * ( value of each right)]
$ 23.68 = $15.00 + [( 6.6) * (value of each right)]
Solve for the value of each right
Right = $1.315
Note that ex-right price plus value of right = old stock price.
23.68 + 1.315 = 24.995= $25.00
This can also be found by
Right price = (Old price - subscription price) / (number of rights per new share + 1)
=($25.00 - 15.00) / (6.6 + 1)
=($10.00)/(7.6)
= $1.315
If these rights are deemed as transferable, they can be sold on the secondary market. Most rights offerings involve transferable rights.
Link where we can get some more information
http://tutor2u.net/business/finance/finance_sources_equity_rights.asp
Friday, February 12, 2010
Budget Deficit and Greece Problem...issue 1
Though the world economy is coming on to tracks there is a possibility that it might get derailed because of budget deficit of many countries is increasing including india and if this continues until they make some measures to decrease the gap by increasing taxes , reducing public expenditure (it would be great if they reduce government running expenditure rather than on money they spend on people..but i guess they(politicians ) do the later..will see that in coming days) and making public sector companies more accountable to owners(public) ..Though i believe Govt should spend more in times of depression kind of times we are see now a days is once a life time chance..only history books will tell this in coming days..but Govt at some point of time should reduce this expenditure on public other wise there budgets will become deeper..so after reducing this they should be in quick position to collect the funds from market or else if another slump happens then they will be in very bad shape i guess...atleast they should have enough funds by another slump so thay they resume pumping liquidity back into system...
Now guess why am talking all these things now is coz of late am hearig news in western media about Greece having budget deficit of over 13% and more...and also they fudged statistics to enter in Euro Zone..and there is also talking going about Euro going down...that inturn will make Dollar also low at some point...this is indeed is sensed by Chineese i guess and they quietly did a a monetary tightening today ..which inturn is warning to normal investors to not to go for risky assests like equities..And this effect is seen in Dow going down by 1%..will see what our nifty will do on monday...
Now guess why am talking all these things now is coz of late am hearig news in western media about Greece having budget deficit of over 13% and more...and also they fudged statistics to enter in Euro Zone..and there is also talking going about Euro going down...that inturn will make Dollar also low at some point...this is indeed is sensed by Chineese i guess and they quietly did a a monetary tightening today ..which inturn is warning to normal investors to not to go for risky assests like equities..And this effect is seen in Dow going down by 1%..will see what our nifty will do on monday...
Wednesday, February 10, 2010
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