A hugely discounted rights issue like this is one that's pretty much forcing holders to take part. There is no point selling your shares at 25 cents to take up your rights at 20 cents UNLESS you weren't planning on taking up the rights , but then you may as well just sell the rights on market for around 4 cents.(lose a cent compared to the first choice but hey).
What we saw last time they had a rights issue, was a similar huge drop to 40 cents (post consolidation equivalent) , but once the dust had settled , the share price recovered back to its pre rights market value. I'd loaded up with rights and shares at rock bottom and unloaded most at 60 to 80 cents soon after. So the losers in this case were those who either didnt take up their rights, didnt take up their full rights or sold their shares during the rights period but took up their rights.
The pre rights market price is around 40 cents and if you do the sums for taking up your rights at 20 , if or when the share price hits 40, you'd find you come out close to even, unless you bought in above 70.
The big question is whether the same pattern will follow. My bet is on yes because they are in a stronger position now than during their last issue. But as I have a bit riding on this I'm more than happy for someone to offset my optimism for some negatives. I also believe, as I have seen where a deeply discounted rights gives owners and insiders a chance to increase their holding by buying up shares at low valuations and/or buying up shortfall shares.
TAM Price at posting:
18.8¢ Sentiment: Buy Disclosure: Held
