On Monday December 14, 2009, 11:58 am EST LONDON (Reuters) - Lloyds (LSE:LLOY.L - News) completed a record 13.5 billion pound ($21.9 billion) rights issue on Monday, ending a turbulent period for the bank and shifting investor focus to a potential government stake sale in 2010. The discounted cash call -- the world's largest to date -- is a key plank of a bumper capital raising effort worth over 23 billion pounds in total and aimed at helping Britain's largest retail bank avoid a state-backed scheme for bad debts. Lloyds Banking Group said on Monday 95.3 percent of the new shares offered were taken up by investors including the British government, which owns around 43 percent of the bank. That left just over 600 million pounds of shares to be placed by the underwriters -- Bank of America Merrill Lynch, UBS and Citigroup -- far better than Lloyds's 4 billion pound sale in June, which left a unwanted shares amounting to 13.1 percent. The rump was sold within hours at 55.5 pence per share, an 18.5 pence premium to the rights issue price. The sale will raise some 18.4 pence per share for investors who did not take up their rights, an average of 180 pounds each, the bank said. A high take-up -- with the rump placed by 1000 GMT (5 a.m. EST) -- was the strongest indication yet of shareholder support for Lloyds's turnaround effort and of appetite for its shares. "I take it as a good sign. Over 95 percent feels quite good to me," analyst Mike Trippitt at Oriel Securities said. "This has drawn a line under the capital issue -- they have a solid capital position, a strong balance sheet. The spotlight now will be on the operating performance." Lloyds shares closed down 1.9 percent at 55.2 pence in a relatively strong market, held back by the placing of outstanding shares. The price had opened up over 3 percent, as investors were cheered by the take-up and by Abu Dhabi's $10 billion bailout for Dubai, where Lloyds is a creditor. Analysts and investors said clarity on the bank's capital and a focus on its operational progress would also make it easier for the government -- which has bought into Lloyds at an average price of 122.6 pence per share -- to begin considering selling down its share as early as the start of next year. "What we have seen today is there is appetite for the equity, so it would be smart for a variety of reasons for the government to begin to place a small amount of its stake in the first quarter of 2010," analyst Joe Dickerson at Execution said. UK Financial Investments, which manages government stakes in nationalized or bailed-out banks, is expected to test appetite for its shares soon. But it is unclear whether a sale could come before a general election due by June -- particularly if shares remain well below the government's average purchase price. The paper loss facing the British government contrasts sharply other countries. The U.S. government, which plans to begin selling the roughly $30 billion of Citigroup (NYSE:C - News) shares it owns as the bank raises $17 billion in stock to repay bailout funds, could see a profit of $13-$14 billion. MOVING ON UP Lloyds, which has 2.8 million small shareholders accounting for 7 percent of its equity before the rights issue, has faced anger over mistakes made during the crisis and a decision to buy embattled rival HBOS -- heightened by revelations that the Bank of England had secretly lent HBOS 25 billion pounds to keep it afloat at the height of the crunch. Lloyds shareholders have seen their stock losing 76 percent of its value since January last year -- before the crisis and the takeover of HBOS a year later. But investors voted overwhelmingly last month to back its capital-raising plan, which includes a debt exchange into so-called contingent capital, and totals over 23 billion pounds after an increase announced on Friday. The new bonds, dubbed "cocos", are designed to convert into equity if Lloyds's core Tier 1 capital ratio falls below 5 percent, shoring up its position if it hits rocky times.
After peaking at about 1.10 in early December, my long gold / short S&P 500 position has fallen by quite a bit, down to about 0.98 at the time of writing. What has happened since early December? Two things: 1. Risk appetite as measured by non-US Dollar currencies (gold, EUR, GBP) has fallen. Examples of this are the Dubai / Greece / Sovereign CDS stories. 2. Despite #1, the S&P 500 has remained flattish. This is equity market bullish, because it hasn't sold off in the wake of (1) Dubai / Greece / etc news and (2) EUR / GBP / gold weakness. However I believe that this is a momentary blip, and in the months / years to come, gold (in US Dollars) will outperform the S&P 500. *** Separate to this, but related to this, I am looking at a GBP/USD short. The UK and USA are similar - developed countries with bloated financial sectors. However the US has the benefit of a printing press and a currency that (for better or worse) is considered the world's reserve currency. Interesting to note that despite the strong multi-month uptrend in the S&P 500 that GBP/USD hit a 2009 calendar year high in early August 2009. Also another lower high in mid-November, despite the strength in the S&P 500 since that time. Also interesting to note the weakness in RBS and Lloyds since mid-September, while the XLF rallied through to mid October. While a lot of people talk about the woeful state of the US Govt's balance sheet, the UK Govt is in much worse shape, and it doesn't have the luxury of printing a reserve currency.
NYT and Sprint (NYSE:S) both came out with earnings reports this morning. Both are noticeably weak following these reports. Sprint down 9% and NYT down 7%. Sprint is the weakest link in its sector. NYT is in an industry that is probably in decline, and I wonder if NYT / GCI / WPO can survive in the years to come.
NYT: "better than expected", but revenues declined year over year http://blogs.barrons.com/techtrader...sts-but-stock-slides-anyway/?mod=yahoobarrons New York Times (NYT) this morning reported Q4 revenue of $681.2 million, ahead of the Street at $653.2 million, while diluted EPS of 44 cents a share beat the consensus at 38 cents. Revenues were down 11.5% from a year ago, which is not good, but at least wasnât as bad as the 16.9% drop in Q3. Total ad revenues were down 15% from a year ago, with a 20% drop in in print ads, offset partially by a nearly 11% increase in digital advertising. Circulation revenues were up 2% on higher subscription and newsstand prices for both the Times and the Boston Globe. This morning, NYT is down 37 cents, or 3.2%, to $11.30.
Sprint Sprint cuts quarterly loss, loses customers http://www.marketwatch.com/story/sp...s-more-customers-lost-2010-02-10?siteid=yhoof WASHINGTON (MarketWatch) -- Sprint Nextel Corp. reported a fourth-quarter loss of nearly $1 billion Wednesday, as the No. 3 U.S. wireless company continued to lose hundreds of thousands of its best customers to rivals.
A few pages of posts about Irish banks, particularly NYSE:AIB (Irish symbol ALBK): http://www.elitetrader.com/vb/showthread.php?s=&threadid=182131&perpage=6&pagenumber=1
Updated list of short ideas: LSE:ALBK (NYSE: AIB) then everything else is a distant second ABK (possible bankruptcy in the next 12 to 18 months) NBG (may be oversold, particularly if a Greek bailout package is actually implemented) BBVA and STD (Contagion from Greece; Spanish property bubble; Bronte Capital says Spanish banks not being honest about true extent of loan losses) AMR and AAI look interesting. They still may take several years to go bankrupt, but they look like the weakest of the airline sector.
PCBC Last price $2.19 (after hours down to $2.10) Company expecting to do large capital raising at $0.20 per share. Assuming the deal gets done (it seems likely that it will, otherwise the bank would probably fail and be seized by FDIC), the share price should move below 50 cents. Price target by "Shareholder Watchdog" is $0.29 http://seekingalpha.com/instablog/4...side-remains-as-shareholders-left-with-little More information on the PCBC thread here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=197527
ABK thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=195838 10Q filed on Mon 17 May contained the following: Page 7: * a going concern warning from management Page 16: * possibility of prepackaged bankruptcy * no guarantee of paying operating expenses and debt service obligations after Q2 of 2011 * may decide prior to Q3 to stop paying interest on debt