After weeks of market rumours of a rights issue, Capitaland finally announced their Capitaland rights issue yesterday. S$1.84 billion of capital will be raised through a rights issue at a price of $1.30 per share (At the same time, Capitaland also announced that their subsidairy, CapitaMall Trust, will be raising S$1.23 billion though their own rights issue).
Shareholders will be able to subscribe for 1 rights share for every 2 Capitaland shares that they own. The rights are renounceable (which means shareholders can sell them if they do not want to subscribe).
Key dates are as follows:
Shares trade ex-rights: 19th Feb 2009 from 9am
Despatch of offer document: 26th Feb 2009
Commencement of trading of Rights : 26th Feb 2009 at 9am
Last day of trading of rights: 6th March 2009 at 5pm
Last day and time for acceptance and payment for Rights Shares : 12th March 2009 at 5pm (930pm for electronic)
Last date and time for application and payment for excess Rights Shares : 12th March 2009 at 5pm (930pm for electronic)
Expected date of trading of Rights Shares : 23rd March 2009
If you are a Capitaland shareholder, it is imperative that you either sell off your rights (if you do not wish to subscribe) or subscribe to the rights. If you do neither, you would have lost the opportunity to recoup some money from the selling of your rights.
Another option is to sell off your Capitaland shares before they go ex-rights.
Small shareholders who own odd lots of Capitaland would also be in a pole position to apply for excess rights shares, and make a small token (assuming no major collapse in the price). This profit comes at the expense of those Capitaland shareholders who neither sold off their rights nor subscribed.
Example:
Purchased 1000 shares of Capitaland at $2.50 (total cost $2500)
Option 1 (Subscribe for own rights)
Subscribe for 500 rights share at $1.30 each (total $650)
Average cost of 1500 shares = $2.10
Option 2 (Subscribe for own rights and excess rights)
Subscribe for 500 rights share at $1.30 each (total $650)
Subscribe for 500 excess rights share at $1.30 each (total $650)
Average cost of 2000 shares is $1.90
Option 3 (sell off rights)
Sell off 500 rights at $0.80 each ($400)
Average cost of 1000 shares is $2.10
Option 4 (Do nothing)
Average cost of 1000 shares is $2.50 (no change)
Note that while reducing the average cost of holdings might seem like a gain, it is not. The NTA/share of Capitaland would have fallen from $3.57/share to $2.80/share after the rights issue. So, each share is actually worth less. Doing nothing (option 4) would thus be extremely detrimental.