Martin Lee @ Sg
Sharing is Caring!

Saizen Rights Issue

Saizen Reits had previously announced a Rights Issue to help in the repayment of their CMBS loans. The proposed fundraising will help Saizen pay off their loans up to 2010 and give them a stronger position to negotiate their other loans that are maturing in 2011.

Sharesholders of Saizen will be given the rights to subscribe for 11 Rights Shares at a price of S$0.09 for every 10 shares of Saizen that they hold.

This works out to be 497,185,362 Rights Shares that will be available. If fully taken up, it will raise $41.1 million for Saizen.

One difference of this Rights Issue from most other ones is that shareholders will be given 1 free warrrant (with a 3-year expiry) for every Rights Shares that they subscribe for. The exercise price of this warrant is also S$0.09. If fully exercised, this will raise another $44.75 million.

This free 3-year “call option” provides an added incentive for shareholders to take up the rights issue. 

Based on the 2008 financial statements, the DPU per unit will drop from 4.9 cents to 2.48 cents (adjusted for rights) and 1.72 cents (adjusted for rights and full exercise of warrants).

The NAV per unit will drop from $1.04 to $0.54 and $0.38 respectively.

Options available to unit holders include:

  1. Sell off Saizen shares before ex-rights date.
  2. Subscribe to rights.
  3. Subscribe to rights and excess rights.
  4. Sell off rights.
  5. Subscribe to some rights and sell off the rest.
  6. Subscribe to some rights and sell off some shares.
  7. Do nothing. (worst option)

 

As this Rights Issue comes with free warrants, option 4 and 5 might not be optimal options.

For example , let’s look at someone has 10000 shares. He will be given 11000 rights. If Saizen trade at $0.12 after ex-rights date, the Rights should trade around $0.03 (0.12-0.09).

Say the investor does not wish to put in any more money to take up his Rights. Instead of selling off all the rights, a unit holder should sell off all his mother share and subscribe to the same number of Rights Shares. He still ends up with the same number of units.

If he sells off 11000 Rights, he will get back $330.

If he sells off 10000 shares and 1000 Rights, he will get back $1230. Using $900 to subscribe for 10000 Rights Shares, he will be left with $330.

In both cases, there is no difference in the amount of money he gets back and number of shares left. However, using the second method, he will be given 10000 warrants with an exercise price of $0.09. This gives him a “free” option to participate in future upside of the share price.

Note the Rights might trade at a slight premium due to the free warrants effect.

For example, 3.5 to 4 cents in the example I gave. Then an investor who wish to sell off all his rights would have to consider whether the premium is worth paying (disposal of rights using the second method) to get the warrants.

Key dates are as follows:

Units trade ex-rights – 4 May 2009

Commencement of trading of nil-paid rights – 11 May 2009

Last day of trading of nil-paid rights – 19 May 2009

Last day for subscription and payment of Rights Shares – 25 May 2009 at 5pm

Expected date of trading of Rights Shares – 4 June 2009

Expected date of trading of Warrants – 5 June 2009

Click here to leave a comment.

Leave a Comment:

Notify me of followup comments via e-mail. You can also subscribe without commenting.

50 comments
xipi says 9 years ago

for item 2) $0.09/warrant, actually I mean the charges to Exercise the warrants. Have transaction fees?

Thanks

Reply
    lioninvestor says 9 years ago

    Hi xipi,

    Not too sure but any transaction fees should be minimal.

    Reply
xipi says 9 years ago

Hi lioninvestor,

Thanks for prompt reply. I still have some doubt.

1) Warrant holder entitle to dividen pay?

2) Exercise the warrants need to pay? How much?

3) If to sell the warrants, usually what is the best timing? near to expiry date or..?

Thanks.

Reply
    lioninvestor says 9 years ago

    Hi xipi,

    1) No

    2) $0.09/warrant

    3) No general answer to that question. It is the same as asking when is it a good time to sell Saizen shares. But note that the time value of the warrant will decay as time goes by.

    Reply
xipi says 9 years ago

Hi,

If i never exercise the warrants before expire date, what will happen? The warrants will automatically change to mother share?

Thanks

Reply
    lioninvestor says 9 years ago

    Hi xipi,

    if you don’t exercise the warrants before expiry date, they will expire worthless.

    Reply
Depp says 10 years ago

Hi Lion

SAIZEN W120602 is the warrent exiry date on 2012 06 02 ?

As long as we sell off this warrent before the 2012 06 02 , we can get back some $$$ ?

as for the factors affecting the warrent pricing will it be the same as for normal Call and Put which time , value , mother shares erosion .?

tks

Reply
    lioninvestor says 10 years ago

    Hi Deep,

    Yes to all your questions.

    You can also choose to exercise the warrants.

    Reply
    oinkoink says 10 years ago

    Hi lioninvestor,
    what is the difference between:

    1. Selling off the warrants before expiry date &

    2. Exercising the warrants?

    Do I have to pay the exercise rights price of $0.09 for the above 2?

    Cheers,

    oinkoink

    Reply
      lioninvestor says 10 years ago

      Hi oinkoink,

      Exercising the warrants mean you pay $0.09/warrant to convert them to Saizen shares.

      Selling them means simply that; selling them for cash.

      Reply
      oinkoink says 10 years ago

      dear lioninvestor,
      thanks for the reply. How do I exercise my warrants in that case? Do I need to call my broker for that? Because if I do a normal sell, it becomes selling of warrants and not exercising it. In addition, for saizen rights, can I exercise the warrants before maturity?

      Sorry, I understand the warrants mechanism but kinda confused on the action/mode required to exercise or sell the warrants.

      Thanks,

      oinkoink

      Reply
        lioninvestor says 10 years ago

        Hi oinkoink,

        you can exercise the warrants any time before maturity. Call the company registrar to request for the forms.

        Boardroom Corporate & Advisory Services Pte Ltd
        65365355

        Actually no point exercising so early as you would be better off selling the warrants and buying the mother shares directly.

        The advantage of holding the warrants is that it gives you the same exposure to the mother shares without forking out the full sum upfront.

        Reply
Roger says 10 years ago

Saw the refund today and worked out the shares allocation numbers. I am surprised that Saizen still needs to drawdown a shortterm bridging loan at 15% interest when they have successfully launched this rights issue. I am beginning to wonder what the management is up to. Would anyone of us here take a loan at 15% interest? Ordinary people do not need to pay that high an interest rate, let alone a sizeable company like Saizen. What happened to their negotiation skills? I also query why they give a huge introducer fee when it costs only a fraction to advertise their intentions. Looks to me like they splurge because it is not their money.

Reply
    lioninvestor says 10 years ago

    Hi Roger,

    If you look at the financing from this Rights issue, $20 million will come from the exercise of the warrants.

    This might not take place immediately. Assuming all the directors play ball and exercise their warrants immediately, there’s still some shortfall which this bridging loan will help to cover.

    And yes, 15% pa is expensive loan (even with collateral!).

    Reply
Roger says 10 years ago

Thanks Lion for the quick reply. Don’t you sleep at all? 🙂

Reply
    lioninvestor says 10 years ago

    I’m an early bird! lol

    Reply
Roger says 10 years ago

Any idea when we will know how many Saizen shares we have been allocated. I have been checking my atm to see whether any money refunded. When will the money be refunded? Thanks

Reply
    lioninvestor says 10 years ago

    Hi Roger,

    the new shares start trading from 4th June so it should be any time from now.

    Reply
    Depp says 10 years ago

    Me too .

    I didnt see any re fund ? as for CDP , i dont see any new allocated shares ?

    Blur . its 03 June now!!!

    Reply
      lioninvestor says 10 years ago

      Should be inside the CDP by tomorrow.

      Expecting the refund of money any time now though they have up to 14 days to return the money.

      Reply
Wayne says 10 years ago

Hi,

I have bought 10,000 of Saizen shares few months back through DBS Vickers and i would like to choose Option 2 – Subscribes to Rights.

What should I do now? I received an application form recently. Should I personally acknowledge the receipt for application at CDP counter? Can I subscribes to Rights through DBS ATM?

Thank you very much for your help.

Reply
    lioninvestor says 10 years ago

    Hi Wayne,

    Yes, you can do it via the atm machine. Just make sure when you apply, the correct CDP account is reflected.

    And take note of the closing date.

    Reply
      Wayne says 10 years ago

      Thank you!!

      Reply
Andy says 10 years ago

Hi,

I just bot into saizen mother share, can i apply for saizen excess rights?

If yes, how do I go about it?

Reply
    lioninvestor says 10 years ago

    Hi Andy,

    Just bought as in these past few days?

    No, you are not entitled to.

    Reply
Yan says 10 years ago

Thanks for the reply, but I don’t understand, what are those that trading in the open market now?
SaizenREIT R -0.070
SaizenREIT R100 -0.065

Are they the same thing that being offered to the shareholder to subscribe with warrants too?

Reply
    lioninvestor says 10 years ago

    Hi Yan,

    R100 and R refer to the same counter. Just that for R100, it is traded in lots of 100 shares instead of 1000 shares.

    Reply
Depp says 10 years ago

Hi Lion ,

i m holding 2 lots ( saizenreits )and received the 2200 rights with warrant. (Saizents R )

Today trading is below 0.09 is about 0.065 now.

you did mentioned ” If you do that, you can also try your luck at getting more shares of Saizen by applying for excess rights at $0.09/share. As long as the price of Saizen stays above $0.09, getting excess rights will be like free money…”

Pls help to advise should i buy from Market or ATM / CDP( Cheque )

Stocks lable

saizent Reits = mother shares ?
saizent rights with warrent = Saizent R ?
saizent excess rights with warrent = saizent R100 ?

Reply
    lioninvestor says 10 years ago

    Hi Depp,

    Both Saizen R and Saizen R 100 refer to the same thing – the Saizen Rights.

    The R 100 is traded in odd lots of 100.

    Current price of rights is at 0.07/0.075 and mother is at 0.12/0.125.

    Example:

    If you sell 1000 rights and buy 2000 shares of Saizen, it will cost you 1250*2-700=$1800.

    If you subscribe for your 1000 rights now, it will cost you $900.
    You will get to keep another 1000 warrants which allow you to buy 1000 shares later at a price of $900.

    In both cases, it will cost you $1800. But the first case will incur transaction cost and you also have to fork out $1800 upfront.

    Reply
      Depp says 10 years ago

      hi Lion ,

      Thks for yr prompt reply & Great Help.

      Just to confirm
      “If you subscribe for your 1000 rights now, it will cost you $900.
      You will get to keep another 1000 warrants which allow you to buy 1000 shares later at a price of $900. ”

      Is $90 or $900 ( at $0.09 ) ?

      My current suitation

      i got ipo 2000 shares .
      Sorry i m alittle confused .

      I m alloted now 2200 rights shares ?

      total Am i having
      2000 shares ?
      2200 rights shares? is this Given or Offer to subcribe?

      why doing nothing is the worst ?
      pls advise as i do not wish to put more $$ to subscribe to this stocks or top up at these moment.

      Reply
        lioninvestor says 10 years ago

        Hi Depp,

        You are given 2200 Saizen Rights.

        You can pay 0.09/right to convert them to Saizen shares. If you do this conversion, you will also be given 2200 warrants which can be converted into Saizen shares at an exercise price of $0.09. The warrants have an expiry date of 3 years.

        If you do not want to pay the 0.09, you can sell the rights. It is trading at about 0.07, so you will get back 2200×0.07. Note that the last day for trading of the rights is tomorrow, 19th May.

        If you neither sell the rights nor pay the 0.09 to convert them, the rights will expire worthless. So it is the worst option.

        Reply
Louis says 10 years ago

HI,

Can I check If I dont own any Saizens right . Can I still apply for the right at ATM just in case its under subscribed I mght have a chance ?

Than YOu

Reply
    lioninvestor says 10 years ago

    Hi Louis,

    No, it doesn’t work that way. It’s not like IPO.

    Reply
Yan says 10 years ago

Sorry for the newbie question again, I have 3300 Rights, can I subscribe more than 3300 Excess Rights? I just wondering what number to fill, it can be any number right? Multple of 100? Thanks

Reply
    lioninvestor says 10 years ago

    Hi Yan,

    You can put in as many number of excess rights as your funds allow. You need to pay (upfront) $0.09/excess rights that you apply for.

    Depending on how many excess rights you are given later, the balance of your money will be refunded.

    Reply
Yan says 10 years ago

How to exercise warrants?

Reply
    lioninvestor says 10 years ago

    Hi Yan,

    the information on warrants can be found in the Saizen Rights OIS page 62-64.

    Reply
viv says 10 years ago

I bought 10,000 Saizen Reit through CPF.

I got the prospectus this morning but there’s no indication in the prospectus as to how many rights I have. Do I just asume its 11,000?

Can I subscribe for them thru ATM?

Thank you.

Reply
    lioninvestor says 10 years ago

    Hi viv,

    Yes, it will be 11,000 so you will need to set aside (11000×0.09) from your OA (and make sure it does not exceed your stock limit).

    As you hold it in CPF, your CPF agent bank will have to do the application for you. They will send you a letter with the instructions.

    Reply
myredeemerlives says 10 years ago

I own 3000 units of Saizen Reits and I have not taken any action regarding the rights issue yet. I was surprised to note that my latest CDP statement shows an entry of 3300 units Saizen Reits R in it. Why is this so? When is the latest cut-off date that I should act and can I do it through ATM (POSB) and how? Thank you.

Reply
    lioninvestor says 10 years ago

    Hi myredeemerlives,

    You have up to 25 May to subscribe for the Rights. Alternatively, you can sell them on the open market.

    Look out for the prospectus which you should be receiving soon.

    Reply
Andy says 10 years ago

I am not an investor of saizen yet, but i wish to invest soon.

At current situation, do you think it will be more sensible buying rights or buying directly @ range at abt 0.15 (current closing price)

Assuming if rights trade at 0.03, definitely it more worth buying rights, am I right to say so?

And regarding that warrants, under what situation will it be exercise? Is it the company whom will decide in future?

Reply
    lioninvestor says 10 years ago

    Hi Andy,

    If the mother share is trading at 0.15, then the rights should trade at around 0.06.

    For the warrants, it will be up to the investors to exercise them. They can do it any time within the 3-year period.

    Reply
      Andy says 10 years ago

      does it means that as long as share px is above 0.09, it can be exercise. by paying 0.09 to convert it to shares which might be higher and immediately have paper gains?

      for the rights, shouldnt the rights open based on the XR share price which is around 0.12 after XD?

      Reply
        lioninvestor says 10 years ago

        Hi Andy,

        The current trading price is already the ex-rights price. It might change from day-to-day and the price of the rights will take reference from it.

        If you are not yet an investor, in theory it should not make any difference whether you

        1) buy the mother share directly; or
        2) buy the rights and pay $0.09 to subscribe.

        Both should cost the around the same.

        Of course, if you get the rights, you will also have the detachable warrants.

        Reply
          Andy says 10 years ago

          Thank you for your reply.

          But as u said in theory there is no different, but assuming rights is selling at 0.06. U buy the rights and pay for 0.09, it get 1000shares + 1000warrants at 0.09 which we can exercise anytime when it is above 0.09 (right?).

          In this case, it will be more worth buying the rights because unless saizen trade below 0.09, immediately after the new shares is allocated to shareholders, and assuming at the point of time the shares is traded at 0.15, we can exercise the warrants at 0.09 and earn a paper profit of 0.06. (am i correct?)

          Reply
            lioninvestor says 10 years ago

            Hi Andy,

            You are right.

            Therefore due to the warrants factor, the rights are likely to trade at a premium.

            Reply
            lioninvestor says 10 years ago

            As it turns out, the rights are factoring in the warrants. They are trading at (Saizen mother-0.09)*2

            The market is efficient.

            Reply
lioninvestor says 10 years ago

Question:

I came across your article on the above subject and wanted to find out more info from you.

I am holding 2000 unit of Saizen share which i got it thru IPO at $1/unit. I have zero knowledge about right and based on your comments, it seems subscribe to the Rights will be a better choice. However I got confusion on what is the different of your Option 2 & 3 and also how do I subscribe to the Rights?

2. Subscribe to rights.
3. Subscribe to rights and excess rights.

Answer:

You have an option to apply for more rights shares than you are entitled for. That is what we call excess rights.

In your case, you will be given 2200 rights which you can convert to normal shares by paying $0.09/right.

If you do that, you can also try your luck at getting more shares of Saizen by applying for excess rights at $0.09/share. As long as the price of Saizen stays above $0.09, getting excess rights will be like free money…

Note that allocation of excess rights will be given priority to odd lot holders so if there is enough to go around, you will have a reasonable chance of getting at least 800 excess rights.

You can subscribe by filling in the form or using an ATM machine. The offer document will be sent to you.

Reply
    Depp says 10 years ago

    Hi Lion ,

    i m holding 2 lots ( saizenreits )and received the 2200 rights with warrant. (Saizents R )

    Today trading is below 0.09 is about 0.065 now.

    you did mentioned ” If you do that, you can also try your luck at getting more shares of Saizen by applying for excess rights at $0.09/share. As long as the price of Saizen stays above $0.09, getting excess rights will be like free money…”

    Pls help to advise should i buy from Market or ATM / CDP( Cheque )

    Stocks lable

    saizent Reits = mother shares ?
    saizent rights with warrent = Saizent R ?
    saizent excess rights with warrent = saizent R100 ?

    Reply
Add Your Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.