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MARKET COMMENT
By
Colchester, Essex -- Shareholders in British Telecommunications (LSE: BT.A) have suffered a lot of bad news in recent months. But seeing their shares trading 9.6%, 52p, lower at 486.25p is probably the last straw. After all, the shares closed at 538p on Friday, so what's happened? It is simply that the shares have gone "ex-rights" and it works like this. On Friday owners of every 10 shares in BT were entitled to buy 3 new shares at 300p. In other words they had the right to these new shares. Today those rights have been detached and are trading separately under the new label of BT Nil Paid and the epic code of (LSE: BT.N) and are quoted at 187.5p. So the maths works like this: On Friday a shareholder held 10 old shares at 538p worth £53.80, plus the right to buy 3 new shares at 300p, for an additional £9, taking the full value to £62.80. Today they own 10 ex-rights shares and three nil paid shares, still worth the same but that total is now divided by 13 to give a theoretical ex-rights price of 483p per share. The fact that that the shares are trading slightly above that level is a positive sign that the issue will be well subscribed. Anyone who held BT shares at the record date, the 9th May, should receive the paperwork shortly, if they haven't already done so. Anyone who bought shares in BT since then, or holds them in a nominee account, may need to chase their broker for this. If you want to split up your allotment of shares -- in other words, take up some rights but not your full allotment -- you must return the forms by 12th June. New, fully paid shares, with the epic code (LSE: BT.F) will start trading on 14th June and all acceptances must be in by 15th June. The price of the new shares will converge with that of the old and the (LSE: BT.F) epic will be dropped once the issue is completed.