Martin Lee @ Sg
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Chartered Rights Issue

Chartered Rights Issue (pdf)

Chartered Semiconductor Manufacturing (CSM) announced yesterday that they would be raising approximately US$300 million from a rights issue. Existing shareholders (as well as ADS holders) will be able to subscribe for 27 new Chartered shares at a price of S$0.07 for every 10 Chartered shares that they own. 

The last traded price of Chartered was S$0.20 so the theoretical ex-rights price works out to be S$0.1065.

Singapore Technology Semiconductor (STS), a wholly owned subsidiary of Temasek Holdings, will take up its entire 59.36% of the rights. In addition, it will be on standby to take up any excess rights (up to 90% of total shares) not taken up by other shareholders.

Key dates are as follows:

Shares trade ex-rights: 16th March 2009 from 9am

Despatch of offer document: 23rd March 2009

Commencement of trading of Rights : 23rd March 2009 at 9am

Last day of trading of rights: 31st March 2009 at 5pm

Last day and time for acceptance and payment for Rights Shares and excess Rights Shares: 6th April 2009 at 5pm (930pm for electronic)

Expected date of trading of Rights Shares : 16th April 2009

The rights offer document can be found here:

Chartered Rights Issue Document

Chartered shareholders would have the following options.

Assuming someone bought 10000 shares of Chartered at $0.20 (total cost $2000)

Option 1 (Subscribe for own rights)

Subscribe for 27000 rights shares at $0.07 each (total $1890)

Average cost of 37000 shares = $0.105

Option 2 (Subscribe for own rights and excess rights)

Note that priority for excess rights will be given to the rounding of odd lots. Other than that, all shareholders will be given the same priority. This is unlike the Capitaland rights issue where the substantial shareholders were given the least priority. So, the likelyhood of getting excess rights will be lesser. This would of course be affected by the demand and trading price of Chartered shares after this rights announcement.

Subscribe for 27000 rights share at $0.07 each (total $1890)

Subscribe for (say) 3000 excess rights share at $0.07 each (total $210)

Average cost of 40000 shares is $0.1025

Option 3 (sell off rights)

Assuming price of Chartered is at $0.105 after ex-rights.

Sell off 27000 rights at $0.035 each ($945)

Average cost of 10000 shares is $0.1055

Option 4 (Do nothing)

Average cost of 10000 shares remains at $0.20 (no change)

Option 4 is the sure lose option unless the the trading price of Chartered actually falls below S$0.07. In which case Singapore Technology Semiconductor will probably end up taking up most of the rights shares.

Chartered Share Consolidation

Following the rights exercise, Chartered will also be looking to do a share consolidation exercise of 10 shares into 1. This will have to be approved at a shareholders meeting.

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70 comments
Tricia says 9 years ago

Hi there,

Many thanks for the link and the detailed explaination.

I also wanted to find out if there was a buy back along the way before the rights were issued. Do you have any information with regards to this?

Your advise if greatly appreciated.

Best Regards,
Tricia

Reply
    lioninvestor says 9 years ago

    Hi Tricia,

    I’m not too sure on that. You will have to search the past year’s SGX’s announcements. Any buybacks would have been disclosed.

    Reply
Tricia says 9 years ago

Hi there,

The numbers can be found on CSM balance sheet for 2008. For 2009 it is based on a forecast.

As at Dec 08, the total shares outstanding was 383.5m and for Dec 09 is expected to be at 941.8m.

My question here is why do we need to multiple the old shares by 3.7 instead of 2.7? Next, when i worked out the calculation, it gave me a figure of 141.9, what does the figure represent?

Also, you mentioned that there was a rights issue and then which was followed by a consolidation. Can you brief me a little bit more on the consolidation. I will also like to know if there was a buy back along the way before the issue of rights even took place. As not everyone would have taken up the rights. If so what were the assumptions?

Thanks.

Reply
    lioninvestor says 9 years ago

    Hi Tricia,

    There’s 27 new shares for every 10 existing shares, so you end up with 37 total number of shares for every 10 existing now.

    If there were 10 new shares for every 10 existing shares – you multiply by 2 and not 1.

    It simply means there are 141.9 million shares after the rights issue. Those rights not taken up would be taken up by the shareholders who apply for excess rights.

    For the consolidation, 10 shares of csm were combined into 1. So if you own 10 shares initially, you will end up with only 1 share after the consolidation.

    Reply
Tricia says 9 years ago

Hi there,

I will like to find out the following:

the number of shares changed from 380 million shares as at 31 Dec 08 to about 940 million as at 30 June 09. Is there an explaination for this change? If so, is there a theortical calculation available to prove the change from 380m to 940m?

Best Regards,
Tricia

Reply
    lioninvestor says 9 years ago

    Hi Tricia,

    Where did you get the numbers?

    There was a rights issue of 27 shares for every 10 shares during that period, so the new number of shares = old number x 3.7. Further, they did a 10 for 1 consolidation after the rights issue, so you will divide the total number of shares by 10.

    Reply
Curious says 10 years ago

Hi Lion,

Any idea or possible reasons or scenarios why there are still many active buyers (appear to be) at the mother shares counter of CSM with 0.13/0.135 buy price, while the right can be openly bought at 0.04/0.045?

You see, 0.04/0.045 added on the right subcription price of 0.07, they can get the CSM share at only 0.11/0.15 later on. Why should they still keeping buying at 0.13/0.135 (at times even traded at 0.14-0.15)?

Hope to find the clues…

Thanks.

Reply
    lioninvestor says 10 years ago

    Hi Curious,

    Covering of short positions could be one reason.

    The entire pool of CSM available for shorting has been loaned out.

    http://www1.cdp.com.sg/web33/scdcint/sbl/viewLendingPool.do

    Forced closure of short CFD positions could be another.

    Lastly, there is additional downward pressure on the rights as those who do not wish to subscribe have to get rid of it by today.

    Those who sold all their rights directly would not have gotten the best deal. They could have sold all their mother share, and converted the corresponding number of rights. This was highlighted in my other post:

    http://www.martinlee.sg/chartered-rights-arbitrage/

    Reply
Nik says 10 years ago

Hi all,

For those who may be tracking this, I like to share a bit of ‘nasty’ experience, with regards to CPF investing.

My plan for the CSM’s right issues was to perform a cost averaging, so that I can attain the breakeven price earlier. The problem was I do not have sufficient fund in CPF’s allowable stock limit to purchase all that are allocated to me, and neither do I have sufficient cash to top-up.

Hence I thought of selling some of the rights to make up the difference. Worried that I may not be able to do this legally, I consulted my investment bank (twice, as a matter of fact), and from which I was informed that the sale proceed from my planned sale can be used to make up the difference.

I thus proceed to release 25% of my rights allocated, made the necessary calculation and was pretty confident that I do not need to make cash-top and still able to subscribe to the balance 75%.

Imagine my horror when after I have done the above, I was told by the investment bank that I still have to top-up cash, as the proceed of the sale of rights cannot be directly and wholly used to cover the difference.

Apparently, such proceed, according to the ‘rules’, will have to be ‘recomputed’ together the existing available limit to produce a ‘new’ CPF’s stock limit, after which then a subscriber can based on this ‘new’ limit to subscribe for the rights (or purchase any shares, for that matter).

All such complexity was not told to me initially, and obviously, that throws my entire plan into disarray. Quite naturally I was furious with the investment bank for giving me different ‘stories’.

Lesson learnt, for myself at least, is never to trust the investment bank’s comment or words directly.

For sharing purposes only. Thanks

Reply
    lioninvestor says 10 years ago

    Hi Nik,

    Yes, things can get pretty messy when CPF investments are involved. Especially when your stock limit has already been hit.

    Thanks for sharing.

    Reply
newbie says 10 years ago

Hi Lion,

If I buy Rights from open market, will they still send me document on how to make payment to convert to Shares.

Reply
    lioninvestor says 10 years ago

    Hi Newbie,

    Yes, you should receive an offer letter. If you do not, you can write in to CDP to ask for it.

    Reply
lioninvestor says 10 years ago

For those who are still holding to their Chartered Rights and intend to sell it, you might want to read my latest post.

http://www.martinlee.sg/chartered-rights-arbitrage/

Reply
Kenneth says 10 years ago

Hi Lioninvestor,

I was wondering how to pay the non-CPF rights issues from 31st March to 06 April? ATM?

Do advise,

Regards,

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    They will send you the offer document with the procedure.

    Typically, you will have the choice of form (with cashier’s order) or atm application.

    Reply
Kenneth says 10 years ago

Forget to add.

My broker advises me that if you sold online for CPF CSM Rights issue, you have to call them up on the same day to request them will activate it as CPF transaction. No use doing it on screen as it is not valid for rights issue.

My broker is Lim & Tan Securities.

Regards,

Reply
Kenneth says 10 years ago

Hi all,

CSM rights issue is on trading now. There is a Chartered R & Chartered R100. The R100 is for odd lots. You can sell your normal lots in R and odd lots in R100 or all in R100. Important is to look at the price to sell in both counters.

I spoke to my investment bank on my CPF Chartered rights and they told me that I can put in the money directly to them if I am interested in purchasing this rights. Need not top up CPF OA as any amount going to CPF will be broken down to SA, Medisave and topping up the OA to $20,000.

I let go at 0.025 which means the buyer will have to pay 0.07 + 0.025 to convert to mother share excluding transaction fee.

Regards,

Reply
    Nik says 10 years ago

    Hi Kenneth,

    Can you kindly enlighten the following:

    1) How do you know your CSM Rights is in CPF? How to know?

    2) If you let go your CPF CSM Rights, I suppose the profit will goes back to CPF?

    3) Is there any option to sell CPF CSM rigths under cash?

    Thanks.

    Reply
      Nik says 10 years ago

      Hi Kenneth,

      Apology, prehaps I need to re-phrase the question: Would it be a case that if a stock is brought under CPF, the associated right issue will automatically be credit into CPF and therefore any sale of the rights will and MUST see the profit be credit back into CPF?

      Thanks

      Reply
        Kenneth says 10 years ago

        A1) I received a letter from my investment bank, OCBC, regarding my entitlement in my CPF account. As for normal rights, you can see it in your CDP account.

        A2) Yes, the profit minus the transaction fee will go to my CPF OA account. Do note to call your broker to inform him of your completed sales of rights from the CPF account. This is only for Lim&Tan securities while I am not sure for others.

        A3) Under Lim&Tan, you can sell under Cash or CPF. But for rights, I was told checking CPF is not workable thus need to call if the rights is residing in the CPF investment account.

        Hope this helps. Also note that if you intent to purchase the rights, you can directly deposit the amount to your investment bank.

        Cheers,

        Reply
          Kenneth says 10 years ago

          Hi,

          The below is the reply from CPF in the event you do not have enough in the investment account.

          ======================================
          You are not required to top up the difference to your Ordinary Account.

          You can head down to any OCBC branch along with the letter of entitlement
          sent out by your agent bank to do a cash top-up
          You will be advised by the counter staff of the actual total payable
          amount.

          However, you may wish to note that such cash top ups are not withdrawable
          or refundable even if your application is unsuccessful.
          ======================================

          Reply
wishme says 10 years ago

if i buy rights from the market do i need to pay 0.07cts per shares to convert it to the mother shares.

Reply
wishme says 10 years ago

i saw someone posting regarding CapitalMall Rights:

I bot some rights @0.14 today, i will use this right to convert into share at 0.82 , thus my cost is 0.96 , ex. costs. I think it is good orice to hold at 0.96 becos the dividend is expected to be not less than than 8 cts per share, so the dividend yield is about 10%.

Why is is so?? i thought buy rights at market will automatically convert to mother shares later on. Please enlight me cause i holding CSM shares and need to know more about rights

Reply
    lioninvestor says 10 years ago

    Hi wishme,

    If you buy the rights on the open market, you need to pay for both the rights as well as the conversion cost.

    The conversion cost is $0.07, thus the rights should trade at the price of mother share – 0.07.

    Technically, there should be no difference between buying the mother share (0.105) or buying the rights (0.035) and converting them (0.07).

    0.105 = 0.035 + 0.07

    Reply
wishme says 10 years ago

hi,

since that rights are caculated in already, could it possible that rights could trade opening at current price 0.105cts cause this price seem quite well support now

Reply
Nik says 10 years ago

Hi Lion,

I see that today’s trading prices of CSM (ex-right) hovered between 0.1 and 0.105.

Supposingly this remains the same the next few days till 23 Mar, will I be right to assume or deduce that the price of the right will likely be between 0.03 to 0.035 (that is, the difference between current price and the price of the right)?

Thanks

Reply
    lioninvestor says 10 years ago

    Hi Nik,

    In theory, yes.

    Reply
      Nik says 10 years ago

      Hi Lion,

      Thanks for the advice. I think I know what to do with the rights issue now.

      Anyway, will you be following up with any main articles / comments on this counter subsequently?

      Thanks

      Reply
        lioninvestor says 10 years ago

        Hi Nik,

        No plans at this moment. Perhaps the results of their rights.

        Reply
wishme says 10 years ago

Hi,

if i sell my charterted today, do i still entitled to the rights starts trading on 23 onwards

Reply
    lioninvestor says 10 years ago

    Hi wishme,

    Yes.

    Reply
      wishme says 10 years ago

      Thanks lioninvestor.

      Reply
Henry says 10 years ago

Hi Nick,

If i remember correctly, CSM price to book value is 0.1, which means book value is about $1.30 based on Friday’s closing price. This should be the theoretical value if the business is liquidated. I’m not so sure but possible because semicon is a capital intensive business. Can Lion comment?

Reply
    lioninvestor says 10 years ago

    Hi Henry,

    I am not so sure about the figures of the book value, but a huge chunk of it is in the form of property, plant and equipment.

    In the event of a liquidation, these are not likely to fetch the book value.

    You are right to point out that semicon is a capital intensive business. So, a lot of capital has to be spent on R&D and replacement/upgrading of equipment.

    Reply
Nik says 10 years ago

Hi Lion,

Thanks for the assistance. Can I ask another?

For Option 1 (as mentioned in your main article), is it compulsory for all the rights given an investor to be purchased, if he choose to purchase? Can an investor buy some of the rights and trade the rest – similar to Option 1 + Option 3?

Reason I am asking is that I think it is alright to purchase the rights, but I do not think I want or need all the 27 for 10. Perhaps I only need half of the given rights, or 2/3. The problem is I do not know what to do with the rest.

Many thanks.

Reply
    lioninvestor says 10 years ago

    Hi Nik,

    Usually, this is allowed. You can refer to the offer document for confirmation when they send a copy to you.

    Reply
Nik says 10 years ago

Hi,

I wonder if this is a relevant question.

I am holding CSM in CPFIA, rather than cash. When such cash call is made, will it have to be made in pure hard cash, or CPFIA can be used?

In another word, can I pay for the rights by using CPF?

Thanks.

Reply
    lioninvestor says 10 years ago

    Hi Nik,

    You can use the money in your OA provided it does not exceed your OA stock limit. Otherwise, you will be given a chance to top up cash into your CPF investment account to pay for the rights subscription.

    Note that this cash top up will be stuck inside CPF even after you sell CSM.

    Your CPF investment agent bank will inform you of your available options.

    Reply
kenneth says 10 years ago

Hi,

I am looking through the 2007 financial report but sadly is unable to find:

i) Net Asset value
ii) share ownership.

Wonder if you can advise i.e. if you have a chance to look at the report.

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    Do you have a link to the report?

    If you can find the annual report, all the information should be there.

    Reply
Help says 10 years ago

Hi lion,

if i buy the rights on the stock market without prior holdings of the mothershare, can i still convert them to the mothershare? i.e. holding only the rights at the moment.

Reply
    lioninvestor says 10 years ago

    Hi Help,

    Yes, but I’m not sure whether you will be entitled to the excess rights.

    Reply
Kenneth says 10 years ago

Thanks. One more question. Historically, is there any
SGX counter issued rights and then do a consolidation?

Regards,

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    These 2 events are independent. Not too sure about the past but recently, there has been a spate of share consolidation and rights issue. So, someday, it is bound to happen (2 events coincide).

    Reply
Kenneth says 10 years ago

Not to mention ST Semiconduct pays less than US$300mil to own 82% of CSM shares. Instead of buying back from the public similar to STATSCHIPPAC when they offered $1.75 when the share was still below $1.

Reply
Kenneth says 10 years ago

Thanks.

The nearest rights I can think of is DBS i.e. 2:1 @$5.42 while the share was about $9.50 then. This is a hot rights issue given DBS profit for 2008 is $2.08b.

As for CSM, red P&L i.e. 3 digits [in millions] losses every quarter for the rest of 2009. Where will the share price move after ex-right? Down. My take is worst than $0.08.

23 – 31st Mar will be the next indicator of market support of rights issue. If one can buy CSM share at $0.08, then the highest possible value is $0.01 per rights. The buyer of rights still have to pay $0.07 to convert rights to share.

My feeling is there is a high chance the mother share will fall below $0.07 before 6 April 09. Reason: Lousy CSM mgt, poor business, high dilution of shares base.

I think best is to sell CSM away and turn it over to private ownership given Temasek just don’t know how to run it. Years of poor performance is a good enough proof. Wonder aloud why they bought HNS in 2007 if they are not performing themselves.

So, to cut story short, take a close look from now till 31st April as this may be my first experience to see a total disaster of a rights issue i.e. no takers and ST Semiconductor has to take the 90%.

Regards,

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    Personally, I never really liked CSM.

    Been loss making for so long and shareholders don’t seem to be getting any value…

    Reply
wishme says 10 years ago

for those contra player are they entitled to rights??

Reply
    lioninvestor says 10 years ago

    Hi wishme,

    If they buy it before 16 March and sell it on or after 16th, then yes, they will be given the rights.

    Reply
Kenneth says 10 years ago

Hi Lioninvestor,

Question:
“Shares trade ex-rights: 16th March 2009 from 9am”. Does this means that all entitlement will be calculated from 15 Mar 09?

Given the present share price at 0.11 per share, it means that if you buy 1000 shares @ 0.11 now, you will get rights of 2700 @0.07. Thus the breakeven is $0.08 per share on 16 April 09.

From 16 to 31st April, this will be the period where one should seek opportunity to sell above $0.08 per share before the 10 to 1 consolidation. Provided the market moves up.

But again, my breakeven is much higher. CSM has never crash so low and quarterly losses is staggering….

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    Last day to buy CSM and be entitled to the rights is 15th March.

    Your numbers are correct but as the market is efficient, that also means if the price of CSM is $0.11 on 15th March, they will trade at $0.08 on 16th March.

    And if the market price falls below $0.07, the rights exercise will be a disaster.

    Reply
wishme says 10 years ago

or i should put it this way:-

270 rights will given to you if u have 100lots of holding
u can sell your 270 rights between 23 to 31 Mar 09.
But if u want to convert it to the mother shares u have to pay S$19800 so that altogether u have 370lots of holding. Please enlight me.

Reply
    lioninvestor says 10 years ago

    Hi wishme,

    You are right. But the amount should be 270000×0.07=$18900.

    Of course, you can also sell some of your rights and convert the rest.

    Reply
      wishme says 10 years ago

      if holding is 52lots will have 140,400 so how to sell leh????

      Reply
      wishme says 10 years ago

      if i hold a number of 52lots how many rights do i have??

      Reply
        lioninvestor says 10 years ago

        Hi wishme,

        Your number is correct. If you have 52,000 shares, you will be entitled to 140,400 rights shares.

        Odd lots can always be sold in the unit market.

        Reply
wishme says 10 years ago

Option 3 (sell off rights)

Assuming price of Chartered is at $0.105 after ex-rights.

Sell off 27000 rights at $0.035 each ($945)

Average cost of 10000 shares is $0.1055

does this apply to me if i got no money to take up rights or if i have 100lots of CSM shares it will remain as 100lots after it ex-right date? thks

Reply
Kenneth says 10 years ago

It is like a no choice situation on rights. We have to buy to lower down our breakeven point. This is especially so since ST Semiconductor is going to consolidate 10 to 1 share.

e.g. If after rights issue, I own 50,000 CSM shares at a breakeven price of 10 cents. Then with the consolidation on end April, I will own 5,000 shares at a price of $1.00 per share with a smaller share base. [assuming 10 cent per share before consolidation]

But bad news is that now CSM has more room to go down especially when US economy continue to spiral downwards.

So what to do? I suggest buy up the rights and find a good opportunity to sell before consolidation…..

This is just my layman view and I sincerely hope 2H US recovers as CSM is very dependent on US consumer spending….

Reply
    lioninvestor says 10 years ago

    Yes Kenneth,

    For most rights, it’s either a case of buy or sell out.

    Reply
Jake says 10 years ago

Hi lioninvestor,

Does that mean I have to subscribe the rights first in order to trade them?
Or will the rights show up automatically inside my trading platform without subscribing?

Thanks

Reply
    lioninvestor says 10 years ago

    Hi Jake,

    You will be given the rights automatically. When you subscribe, you convert the rights to the normal CSM shares.

    You can trade the rights or if you convert, you can trade the CSM shares.

    They won’t show up in your trading platform but it won’t matter.

    Reply
Help says 10 years ago

As im a very new investor in the stock market (im only 21) which happens to be in the bearish mode now, i dont wish to see my investment going up in smoke and thus would like to ask you a few questions pertaining to the rights issue (I did read the article regarding capitaland\’s rights issue but still have a few unanswered questions).
1) before the stock goes ex-rights, the price of the stock generally goes down to factor in the rights correct?
2) if the market fluctuates and say i buy the stock at 12cents but it closes at 15cents just before the ex-rights, do i benefit more than someone who bought the stock ex-rights at a higher price?
3) the price of the rights on the stock market will then be solely/mainly determined by the different in the price of the motherstock with the rights conversion price correct?
Thats about most of the important/urgent questions that i have at the moment. Currently, i have 20 lots of Chartered Semiconductor Manufacturing and according to the announcement, i will be getting 57 lots of rights correct? (27X2=54) hence, if i choose to convert all the rights offered to the motherstock, i would need to take 57K X 7 cents (the price of the rights) = $3780 correct? Is there any way to calculate the price of the stock ex-rights assuming that one uses a theoretical price of the stock before it went ex-rights? eg. just before going ex-rights, Chartered Semiconductor Manufacturing shares sold for 14cents. taking that 27 rights are offered for every existing 10 at a price of 7 cents, what could be the price of the rights and the motherstock? Assuming that i bought the stock for 12cents, would that place me in a better position than the investor who purchased the stock at 14 cents before ex-rights? (refer to Q2). Thanks alot for your help!

Reply
    Help says 10 years ago

    one more question i have, if i own only 1000 of the shares before it went ex-rights, can can apply for say 5000 rights shares? i.e. apply for more rights shares than the original amount of shares before ex-rights.

    Reply
      lioninvestor says 10 years ago

      Hi Help,

      If you own 1000 shares, you can apply for 2700 rights shares. Yes, you can apply for an additional 2300 excess rights if you want to.

      Reply
      lioninvestor says 10 years ago

      1) After the ex-rights date, you will see the price drop to factor in the dilution of shares. Other price movements will be dependent on market/share sentiment.

      2) A lower purchase price will translate to a higher profit or lower loss when you sell off the shares compared to someone who bought it higher. If you do not buy/sell anything, the price at ex-rights will not really benefit you.

      3) Yes. But remember that the impact can go the other way. A buy up or selldown of the rights can move the mother share.

      $3780 and 54 lots is correct.

      To calculate the theoretical ex-rights price, just rework my example above.

      Assuming the price of Chartered is $0.12 today.

      Cost of 10000 shares is $1200.

      Cost to subscribe for 27000 shares is $1890

      Total cost is $3090 for 37000 shares.
      Average price is $0.0835

      Therefore, CSM should trade at around $0.08-0.085 after ex-rights.

      Reply
Jake says 10 years ago

Hi Lioninvestor,

Can i check with you the steps needed to be done in order to sell off your rights(Option 3).

How do i go about doing it? Is it advisable in the current situation?

Reply
    lioninvestor says 10 years ago

    Hi Jake,

    The CSM rights will be traded from 23 to 31 March.

    Look out for a counter Chartered R.

    Reply
Kenneth says 10 years ago

Ok, thanks. Just came over the radia that NOL is also thinking of right issues to raise at least $250 million.

As for Chartered, the DJ commended that small investors are caught between the rock and a hard place. To take up the rights issue, it is just like giving Chartered money to burn in the event things do not turn around in a year.

If no takers for the right issues, then Temasek will have a possible max holding of 82%. This figure seems to be close to what % ownership of STATSCHIPPAC.

Tough decision on this rights issue given the future economic prospect for US economy is bad…..

Reply
Kenneth says 10 years ago

Hi Lioninvestor,

The last part of the message is that CSM is going to consolidate 10 shares into 1. With ST semiconductor being the major shareholders, most likely it will pass.

Does it means if the last share price is $0.125, 10 shares price is $1.25. So the next trading price will be $1.25 per share.

Is this how consolidation works?

Looking at the bearish US economy, CSM is not expected to make any money in 2009 or even 2010. So how can $1.20 be substainable?

Reply
    lioninvestor says 10 years ago

    Hi Kenneth,

    There were some other share consolidations done recently.

    http://www.martinlee.sg/share-consolidation/

    If you think of owning shares as ownership of the company, you will realise how it works.

    For example, Company A has 1000 shares and each share is worth $1.

    There are 100 shareholders each owning 10 shares. Thus, each person owns 1% of the company. Upon a share consolidation, each shareholder will be left with only 1 share.

    However, as there is now only 100 shares in circulation, they still own 1% of the company. Accordingly, each share should be worth $10 now if valuation has not changed.

    Reply
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