easyJet Rights Issue September 2021

So if i want to take up the rights offer but I’m already maxed out on ISA account, would I sell off some other stock in my isa account to be able to exercise the EasyJet offer?

If you don’t participate what does “your rights will be sold on 21.09 at the market and the proceeds will be distributed shortly after to your account” mean? Does that mean you get some money back if you don’t partake in the offer?

Normally when rights are tradable, you can sell them rather than exercise them.

Let’s say your right gives you an option to purchase a share at £4, and the share price is £4.50, then the value of the rights would be approximately £0.50. In reality it will be slightly less, but hopefully that helps explain. I’ve not checked the T&C of the offer but would suspect the rights would be ‘tradable’ to allow a full uptake in the new share issue.

Edit:

Parent Line
EASYJET PLC - ESJ:LON - GB00B7KR2P84

Rights Line
EASYJET PLC Rights - ESJN:LON - GB00BMY5XK54

Looking at it right now, the exercise price is 410p.
The parent line is pricing around 560p, and the rights line 150p. The difference being roughly the 410p exercise price.

Impact wise:
The current share price looks too cheap, as in an overreaction to the dilutive effect in my view, explained in this statement from the RNS

The Rights Issue price of 410 pence per New Share represents a discount of 35.8% to the theoretical ex-rights price of 638 pence per Existing Share by reference to the closing price on 8 September 2021 (the last Business Day prior to the date of this announcement)

Given the current market price of the parent trading at 560, either represents a 13% market drop since the 9th of September, or an overreaction to the news, or dilution of future growth potential.

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I’ve been advised by T212 chat I can’t buy the rights to all my EJ shares because I’ve maxed out my ISA.

Feels like discrimination against those with maxed out ISA accounts??

Have I got this wrong? Any advice? Thanks

Don’t use the term discrimination, totally devalues an argument when it comes to something like this

Can’t you just free up some cash or were you hoping the rights would transfer to Invest?

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100% This since you have maxed out your 2021/2021 ISA contributions as set by the UK Government limits, you cant add more cash. To utilise the rights inside the ISA, you will have to free up cash by selling another asset within your ISA.

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The definition of a first world problem:- maxing out your ISA. :wink:

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Ok maybe I’ve got it wrong (hope I have) but when I chatted with a customer service rep on T212, they said clearly I couldn’t sell stock within my ISA to free up the allocation.

The example they gave was:
Buy stock for £100 and your ISA Allocation goes down £100. If you then sell £50, you haven’t ‘freed up’ £50….

They dont understand how an ISA works then.

The only ‘limit’ on the ISA, is 20k of new cash contributions each tax year. Once the cash is inside the ISA wrapper, you can do what you want with it.

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what they mean is that the allocation is determined by deposits and once used cannot be returned (as compared to a flexible ISA where withdrawing money returns some of the allocation from the same tax year).

so once your £100 is inside the ISA, you can buy and sell infinitely without any taxes or changes to your allocation. just don’t withdraw those funds and try to re-deposit.

so figure out how much free funds you are lacking inside your ISA for the rights issue and if you sell the equivalent value from other shares, those funds can be used to make the purchase.

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Surely you only need to have enough Free funds (cash) within the ISA account to purchase the amount of shares you’re eligible to redeem under the rights issue.

Ok you cant add new funds because you have hit the threshold but freeing up spare cash within the ISA account from funds already deposited should be able to be used towards buying the eligible shares offered to you? Makes sense to me anyway, so I dont understand why you cant do it this way. As any reinvested cash within the ISA from sales of shares does not count towards your ISA limit.

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Ok thanks all. Makes total sense to me and what I assumed initially. I wanted to double check and just really weird that the T212 rep was so insistent (and also apologetic…) that freeing up ISA allowance by selling off within the wrapper was a no go…

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unfortunately miscommunication happens every now and then. likely due to the “ISA allowance” as both sides were thinking of something a bit different. so the rep was correct in that you can’t free up allowance/allocation, but the example was just inaccurate/misleading/confused. (it’s not the ‘buying of shares’ that affects your allowance after all)

when purchasing shares via your rights issue all that matters is your free fund balance and not how those funds were prepared.

I’m not sure how many in the support centre invest, so they may be trained but not fully up to speed with how everything works (mind you it’s still a work in progress for those of us who do :man_shrugging:) and English may be their second language so little oversights in understanding can slip by unnoticed. as long as everyone tries to be clear and concise about their issue and rather a bit persistent, you can usually resolve your issue after a few rounds of correspondence.

it’s why I get picky about terminology used when discussing investing, because it can have drastic effects if things are misunderstood at a critical time. (like someone placing a stop sell order under the assumption it prevented the broker from selling their shares without consent. only to have it trigger and close their positions)

have not yet been through a similar issue myself – hitting the limit is not within my means unless I withdraw & deposit frequently – but it’s only a matter of time that something occurs to one of my holdings.

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