If you noticed, the closing price of Chartered yesterday was 0.11/0.115 while it was 0.025/0.03 for the rights. This is also the trading price at the time of this post.

It seems that the rights are trading at a slight discount than what they should be trading at. Theoretically, the price difference between the rights and the mother share should be 7 cents.

This means that shareholders who had wanted to sell their rights should consider selling their mother shares and exercise the corresponding number of mother shares instead.

For example, if you have 10k shares and 27k rights and you sell all the rights directly, you get

27000 x 0.025 = $675

Instead, if you sell 17k rights at 0.025, sell 10k shares at 0.11 and pay $700 to convert 10k rights into the normal shares, this is what you get:

17000 x 0.025 = $425
10000 x 0.11 = $1100

Total revenue = 425 + 1100 – 700 = $825

You will get $150 more using this method. Considering the fact that you have to make an extra trade, then it works out to be $120.

Putting the mathematics aside, what it actually means is that you have managed to sell some of your rights at (0.11-0.07) 4 cents instead of 2.5 cents. This is an increase of more than 50%.

If your original intention is to take up your full rights entitlement and keep the original shares, then this strategy will not be applicable to you.

Lastly, this post is not an inducement to buy or sell any Chartered shares or rights. As with all investments, please perform your own independent calculations to see whether it is worthwhile to “get rid” of your Chartered rights this way.

At the point of writing, I have a neutral exposure to Chartered.