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Lloyds shares offer: Investors need to act fast

02 June 2009 / by Rachael Stiles
Shareholders who take up the Lloyds Banking Group shares offer can avoid the risk of diluting their holdings, according to The Share Centre, but they need to act fast.

The Lloyds shares offer is only open until Friday, June 5, and so far a third of The Share Centre's share dealing customers who are existing Lloyds shareholders have taken up the offer.

The stock broker is urging any remaining Lloyds shareholders who have not yet opted in to do so soon; its own customers only have until Wednesday at midday to subscribe to the new Lloyds shares through The Share Centre.

The Lloyds share offer is the first major one since the Financial Services Authority reduced the minimum subscription period for undertaking rights issues to 10 working days.

But, while the new Lloyds rights issue will help it to raise some of the valuable capital that it needs in a short space of time, Nick Raynor, investment adviser at The Share Centre, is concerned that the shorter time span of the issue could prove to be a disadvantage to investors, some of which might fail to realise how quickly they need to act in order to secure new shares.

"Shareholders should certainly consider taking up the offer of 38.43 pence for every new share they can apply for, if they don't they run the risk of diluting their holdings as a result of the new shares being made available," explained Mr Raynor. "Plus, there is no guarantee that the rump placing will be able to compensate with enough cash to cover the cost of the possible dilution of shares.

"Big institutions are not going to want to pay a lot for the shares, so shareholders waiting for the pay-out could be left disappointed," Mr Raynor warned. "Even those less convinced about the bank's future should consider taking up the offer, as they stand to gain even if they buy and sell later in the week. This will also help to keep the government's stake down and enable Lloyds to buy back £4bn of its current preference shares."

Mr Raynor concluded that he hopes eventually to see Lloyds "reintroduce dividends to loyal shareholders."

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