Martin Lee @ Sg
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Chartered Rights Arbitrage

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.

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4 comments
craze says 10 years ago

hi lion investor.

I have subscribe to the rights. Can I subscribe more excess right since I have subscribe once? Is there any limit of excess right?

Reply
    lioninvestor says 10 years ago

    Hi Craze,

    There is no limit on the number of excess rights that a shareholder can apply but I am not so sure about the part on multiple applications.

    I think it is best to call the hotline to check:

    65111809

    Reply
    Wonder says 10 years ago

    Hi Lion,

    I am residing in US and just today I received the despatch documents regarding the right. I dont think I have sufficient time to subscribe via mail now. I am entitled to 42K of the right and if I do nothing, how much will I get back ?

    Reply
      lioninvestor says 10 years ago

      Hi Wonder,

      Have you holding the rights or ADS rights?

      For Singapore based holders of the Chartered Rights, (as mentioned in the offering document) the rights will expire worthless if they are not sold or exercised.

      Unfortunately, the last day of trading for the rights is already over.

      For US based, I am not so sure whether you will get back any money. I suggest you call the hotline to clarify.

      Reply
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