Paragon rights issue (PAG)

About as deeply discounted as it is possible to get

Paragon has announced a 25 for 1 rights issue at a discount of 90 per cent. For every £1 share you own in Paragon you get to buy 25 new ones at a price of 10p.

This outcome was pretty much inevitable given the continuing credit squeeze and I’d expect shareholders to support it. There is residual value in the company and this should allow Paragon to extract it.

It’s also interesting to note another rights issue, this one from Intermediate Capital Group (ICP), which was also quite predictable given the shutdown in the credit markets. I wonder who’s next? My guess is London Scottish Bank (LSB).

What I don’t understand about Paragon is how UBS can earn a (presumably massive) fee to underwrite an offer at such a large discount. There’s almost no chance that the shares will fall 90 per cent (leaving them stuck holding the issue) so what risk are they actually taking?

January 11, 2008 | Filed Under Companies

 

Comments

One Response to “Paragon rights issue (PAG)”

  1. Corn on January 15th, 2008 3:36 pm

    paragon and arg, you should just shut up shop and come back when you are 16

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