general quesion about right issues

purejoker

Hi there,

I have 50000 shares in a company, I brought them for 0.03p each and now they have a rights issues and I can buy up to 300000 shares in rights issues which are 0.015p each. They are giving away 6 new shares for every original share I own.
I just have a few questions on my options:

1. if I sell my original shares will I still be entitled to buy out of the 300000 right issues shares? What I am thinking is to get more shares for the money I invested. Sell my original shares to buy the right issue shares?

2. If I don’t take up the rights issues they will sell the shares for me and give me the difference, so if I buy some of the 300000 shares do I still get the different with the left over share?

3. Can I sell my right issues without buying them first before the dead line date? So that I get the difference?

Thanks a lot

Pure!

bendix

purejoker wrote: »

Hi there,

I have 50000 shares in a company, I brought them for 0.03p each and now they have a rights issues and I can buy up to 300000 shares in rights issues which are 0.015p each. They are giving away 6 new shares for every original share I own.
I just have a few questions on my options:

1. if I sell my original shares will I still be entitled to buy out of the 300000 right issues shares? What I am thinking is to get more shares for the money I invested. Sell my original shares to buy the right issue shares?

2. If I don’t take up the rights issues they will sell the shares for me and give me the difference, so if I buy some of the 300000 shares do I still get the different with the left over share?

3. Can I sell my right issues without buying them first before the dead line date? So that I get the difference?

Thanks a lot

Pure!

I think you are misunderstanding what a rights issue is. They are not 'giving away' free shares for every share you have; instead they are giving you the 'right' to buy extra shares at a discount to the current market rate. In this case they are giving u the right to buy six new shares for every one you currently own. You, of course, have the right to either buy them or not, but you need to be a holder of existing shares to do so.

To answer your questions specifically:

1) No, not possible. When you sell your existing shares, the right to buy the new ones at a discount passes to the new owner, not you. You have to own them to get them.

2) No

3) Yes, possibly, but it's technical and difficult and involves all sorts of forward trading. Remember, one of the impacts of this is to flood the market with cheaper new shares to existing shareholders, thus inevitably lowering the price for all existing shares in circulation. I don't know what the current market share price is, but given they seem to be penny dreadfuls, it will be a tricky manouevre.

dc110

1. if I sell my original shares will I still be entitled to buy out of the 300000 right issues shares? What I am thinking is to get more shares for the money I invested. Sell my original shares to buy the right issue shares?

Assuming you hold your shares at the "ex rights" date you will be entitled to the rights regardless fo what you now do with the original shareholding. I think i know which company you are referring to based on the figures but I dont know if you had a specific reason for not mentioning it - so I wont either. If you are happy to be more specific and mention the company ill confirm in more detail ....

2. If I don’t take up the rights issues they will sell the shares for me and give me the difference, so if I buy some of the 300000 shares do I still get the different with the left over share?

Do you mean if you dont take up your full entitlement will you still receive lapsed proceeds? If thats what you mean the answer is ... assuming there are lapsed proceeds of a sufficient value yes you can still receive it even if you have taken up a proportion of the entitlement.

3. Can I sell my right issues without buying them first before the dead line date? So that I get the difference?

Do you mean sell the new shares you obtain under the rights issue? Or sell your rights on the market?

You can sell the rights on the market if you do not wish to take them up. If you meant can you sell your new shares then yes but they may not start trading immediately after the offer closes so they may be a few days before you can trade them.