The RBS rights issue – Where to from here?
Following on from my last article on RBS, I had a chat with ‘the trader’ to get his opinion. As he is never without a word or two on these matters he suggests, the RBS’s rights issue is an attempt to avoid the government increasing its holding from 70% to 85% by way of a fee for putting £325bn of toxic assets into the bad bank. The rights issue has caused a flutter in the dovecotes (bulletin boards) as no one really seems to understand its potential impact.
Look at it this way: the government has an interest in seeing RBS and its other banking waifs and strays prosper. That way they can not only be shot of the unwelcome lodgers on the governments balance sheet but, more importantly, the government wants to be in a position to get shot of them at a profit. Taking the toxic assets out of the equation already improves the picture and for a government that is more strapped for cash than a drunk without the taxi fare home on a wet night, they will take any measures they can to cash in as soon as possible – knowing the government that would be before the election if they had a snowball’s hope of meeting all the requirements by then.
You can always count on ‘the trader’ to be colourful.
v
RBS (with our help) has come a long way in about a year. The government can neither afford to see it sink without trace nor see the shares not be made juicy for the forthcoming “privatisation”.
Here’s the risk: government support will last as long as it takes to achieve the ripe price and Mr. Hester’s bonus is geared to how well the share price does.
We are in a staging process for RBS: that will ramp up the price but a lot of people will sell once the comfort blanket of government ownership is snatched away from the mewling and puking infant.
Trader
Anyone’s guess really. I bought these back in Feb and still holding.
Gegee