This tip has gained 31pc but now the firm wants more of your cash. Should you oblige?

Our advice to buy Future, the publisher, has paid off so far, but should you back it further in a new rights issue?

A GAIN of 30.9pc on our advice to buy Future, the publisher, six months ago is welcome but investors now need to decide whether to put more money into the stock. This is because the firm is asking shareholders to fund the acquisition of an American publisher called Purch via a “rights issue”. Future wants to raise about £100m by offering investors the chance to buy three shares for every four they already hold at a discounted price of 303p.

Before we discuss the rights issue, we should first decide whether to hold the shares at all in light of the acquisition. Companies that buy other businesses always extol the virtues of the deal but the results often fail to live up to expectations. In this case, however, the logic looks sound. “We think it [Purch] is a great fit,” said Chris Mcvey, co-manager of the Octopus UK Micro Cap Growth fund, whose holding prompted our tip in February. “The assets being acquired build on the group’s expertise within the consumer technology sector and offer a platform for further organic growth. We expect the deal to increase the proportion of revenues from the US, a much larger market than the UK.”

Mcvey said he had bought more Future shares in May. “The investment case remains compelling. The management team continue to execute their strategy of organic as well as acquisitive growth, building a consumer media business that is increasingly focused online and that offers scope to significantly drive margins,” he added.

Despite the rise in the shares since our tip, he said he remained “comfortable” with their valuation of 21.5 times forecast earnings for the year to September. That forecast does not include any benefit from Purch. In principle, therefore, our advice is to take up your rights. However, shareholders’ circumstances come into play here. If, say, all your cash is committed you could sell some rights to fund the purchase of additional shares. Whatever you decide, let the company know, directly if you have certificates or via your broker, by 11am on Aug 20.

If shareholders approve the rights issue on Friday, the new shares will begin trading on Monday and the price will adjust to reflect the fact. A fall does not mean a loss for shareholders. Questor says: hold, take up rights Ticker: FUTR

Share price at close: 500p

Update: certificated holdings

A week ago we covered the uncertainty over whether investors could be forced to foot the bill if their stockbroker or platform went bust, and suggested that very cautious savers might want to consider holding shares in certificate form. This cuts out middlemen such as brokers altogether and gives investors direct ownership of their assets.

One reader got in touch to ask if he could also own corporate bonds in certificate form.

The answer turns out to be “no” but the reason is, to Questor’s mind, fascinating. Bond markets work quite differently from stock markets. The latter have at their heart the share register maintained by each company to keep a record of its shareholders. A share certificate is in essence a copy of an entry on that register and provides evidence of ownership without actually constituting the asset.

If a certificate is lost, you still own your shares because your name is on the register; you simply have to ask for a replacement certificate.

But a company that issues a bond does not normally maintain a register of bondholders.

Instead, the bonds are issued in “bearer” form: a paper certificate or “bearer bond” entitles the owner (the bearer) to the interest and repayment of capital at maturity.

If you lose the bond, there is no way to prove your ownership or obtain a replacement and your entitlements pass to the new bearer.

Bearer bonds are therefore akin to cash and it would be too risky for issuers to send them out to individual holders.

Instead, a kind of “master bond” is issued in bearer form and held securely by trusted intermediaries such as the big “clearing” institutions, Clearstream and Euroclear. These companies then allow investors to buy and sell bonds electronically, backed by the physical bearer bond.

There are a few exceptions: most gilts – British government bonds – are issued in certificated form, with a bondholder register.