Tradable subscription rights

[NRS]

I have some shares in a company that has a rights issue with tradable subscription rights. This is the first time in my trading that I've had it. From what I understand I can get "x" new shares for the discounted price. If I want I can trade these rights. The new shares they are offering are at 3.50, with the tradable rights currently going for around 0.40 on the market.

If I understand this correctly I can use my option to buy the rights I want, which will get given on the deadline. However I once I use the option I can trade these rights straight away, and once the deadline comes I would automatically pass on the new shares to whoever bought them from me and make 0.4 per share?

Basically it is how does the timing work in regards to money movements?

http://www.rocksource.com/news-archive/prospectus-...

[Claudia Skies]

NRS said:

I can get "x" new shares for the discounted price.

Yes

NRS said:

If I want I can trade these rights.

Yes

NRS said:

The new shares they are offering are at 3.50, with the tradable rights currently going for around 0.40 on the market.

Fair enough. But what are actual shares currently trading at in the market?

NRS said:

...once I use the option I can trade these rights straight away, and once the deadline comes I would automatically pass on the new shares to whoever bought them from me and make 0.4 per share?

Now I'm confused. Unless you want to subscribe for the new shares and hold on to them you have two choices,

1. Sell the subscription rights now for 40p, or

2. Pay up the £3.50 per share in the hope that the shares you buy will be worth more than £3.90 and thus can be sold at a profit.

[NRS]

Claudia Skies said:

NRS said:

...once I use the option I can trade these rights straight away, and once the deadline comes I would automatically pass on the new shares to whoever bought them from me and make 0.4 per share?

Now I'm confused. Unless you want to subscribe for the new shares and hold on to them you have two choices,

1. Sell the subscription rights now for 40p, or

2. Pay up the £3.50 per share in the hope that the shares you buy will be worth more than £3.90 and thus can be sold at a profit.

I think I've been confused, as the new rights have only been shown in my holdings, but have not appeared in my shares account in a way I can trade them. Thus I am not able to do anything with them and I then assumed this meant they become available at the end of the rights subscription date instead. However from your reply it seems not and so there's something strange with my account. Thanks for the help.

[Claudia Skies]

I'm familiar with "subscription rights" in their paper and but the principles are the same in the world of electronickery.

The company is at present operating two separate lists,

1. The usual ongoing list of its current shareholders.

2. A new list of people who have been offered subscription rights. Obviously this starts out as a list with the same names as list 1. above.

List 2 will evolve over time as people on it (i) take up their subscriptoion rights, (ii) reject their subscription rights, or (iii) sell their subscription rights to someone else.

Eventually the end date comes and people on list 2 who have paid will be moved onto list 1. In other words, list 1 will have additional shares added to some names and some completely new names/shares added as well.

List 2 eventually contains nothing and is closed down.

[twinturboz]

Yup so your entitled to x amount of discounted shares. Supposing you don't have the cash to stump up for the discounted shares you can sell your rights onto someone else which is what the tradable rights are, so you'd pocket the .40 to compensate you for the dilution that will occur once the rights issue shares are issued.

If you want the right to buy more shares than you've been allocated at a discounted price you can buy more of the tradable rights, come the end of the 19th, each one share of the rights you own you'll be able to convert into one discounted share by stumping up the cash which you have to do by the 26th Feb, however just to complicate it further you have to state you want to subscribe to the discounted shares by the 23rd Feb.

If you do nothing i.e. you don't sell your subscription rights before end of trading on the 19th and you don't state your intention to subscribe to the new shares by the 23rd Feb then once the new shares become active on the 27th you'll have lost out as the dilution will mean your existing holding will be devalued and you have had no compensation.