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Hargreaves Lansdown senior analyst Janette Colloby
"I think everyone is very hopeful that the 3G licenses will actually be successful"
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Monday, 18 June, 2001, 17:25 GMT 18:25 UK
BT wraps up share sale
BT logo
British Telecom has found buyers for the 207 million rights issue shares not taken up by existing shareholders.

The auction for the 10.5% of the rights issue stock remaining on the shelf was fully subscribed within three hours of opening at 0600 GMT.

And by mid-afternoon, competition among institutional investors had sent the price of the rights issue shares, which were offered to BT shareholders at 300p, to 430p.

This represented only a small discount to the price of the firm's existing stock on the London Stock Exchange at the close of the auction.

And BT shares ended Monday at 428p, down 6p on the day.

Analysts credited the success of the auction, which closes the largest rights issue in UK history, to a renewed confidence in the firm, following recent successes in cutting its debt.

"But I would not get too passionate about it," Hannes Wittig, of Dresdner Kleinwort Wasserstein warned.

"The sector as a whole is pretty much bombed out."

Huge discount

BT launched the 5.9bn rights issue last month in an effort to raise cash to counter a debt mountain thought to have reached 30bn at one point, following huge spending on licences for next-generation mobile phones.

Investors were offered three BT shares for every 10 held.

To ensure take-up, the new shares were offered at a deeply discounted rate - 3 - a 47% discount to the share price on the day prior to the launch.

Nonetheless, the move was seen as a huge gamble, given the volatile state of telecoms stocks.

Many analysts expected BT's 1.8 million private investors to shy away from the record-breaking cash call - despite the heavy discount.

"The working assumption was that none of the retail investors would take up the rights," one source close to BT said.

Few stockbrokers were actively encouraging their clients to take up the rights.

Institutional interest

But BT on Monday revealed that 89.5% of the rights issue had been taken up by investors.

BT chairman Sir Christopher Bland said he was "delighted" by the support the firm had received from our shareholders.

"This, together with the successful disposal programme we have put in place, will enable us to deliver to shareholders the benefits of structural change."

It is understood that while almost all institutional investors plumped for the discount offer, many of the 1.8 million private investors stayed away.

The take-up level, which came in above expectations of about 85%, will encourage European telecoms companies such as Dutch KPN to press ahead with similar cash-raising initiatives.

BT shareholders who decided not to take up their rights will receive a cash payment following Monday's auction of the outstanding shares.

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See also:

14 Jun 01 | Business
Deadline looms for BT shareholders
23 May 01 | Business
Q&A: BT rights issue
21 May 01 | Business
Trade starts in BT share rights
15 Jun 01 | Business
Small investors 'answer BT's call'
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