BT is asking for £6b from a discounted rights issue -- is it a good deal for shareholders that will help set the company back on the right road, or will it be throwing good money after bad? Two Fools put the cases for and against, and you vote on the outcome, in this week's Duel.
The Bull Case
"It's better late than never, and even though the new issue has had to be priced at a discount of around 45% off the existing share price, it's the only practical way for BT to go forward.
The new share issue should raise nearly £6 billion. Together with selling off Yell, finally suspending those crippling dividend payments, and splitting the rest of the company into two separately-listed entities, we should see a reduction in debt of around £10 billion." more
The Bear Case
"BT is not a growth business anymore, but neither is it generating enough cash to make it an income stock. The evidence from the falling returns on capital indicate that BT is no longer a good home for additional capital and, for that reason, provides no incentive to give it any more. Until it can demonstrate that it is using its own money more efficiently I see no reason to give it more of mine. So vote bear: don't take up the rights, and sell the shares." more
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