Rights offer

Hi Shi, did you manage to get any clarity on the subscription cost of these rights?

I am on the FNB platform and I phoned them this morning regarding taking up my rights. The guy I spoke to was adamant that the actual cost would be 0.01 cents and not 0.001 cents as released in the SENS announcement

That's a huge difference. So if 1mil shares, its the difference between a subscription cost of R1000.00 vas R10 000.00

 

I believe it is 0.001 c and one should not look at the current price of the N shares. This is why I didn't think one would be able to sell the rights. Also, check out this morning's SENS (where a Director took up his rights) which confirms to me the 0.001c subscription cost.

Extracted from NUT SENS this morning. With this subscription price, does it mean that a shareholder will not be able to sell their N shares?

 

Hi Shi, did you manage to get any clarity on the subscription cost of these rights?

I am on the FNB platform and I phoned them this morning regarding taking up my rights. The guy I spoke to was adamant that the actual cost would be 0.01 cents and not 0.001 cents as released in the SENS announcement

That's a huge difference. So if 1mil shares, its the difference between a subscription cost of R1000.00 vas R10 000.00

 

In terms of the Rights Offer, the Company will offer 10 billion ordinary
       shares to NUT shareholders at a subscription price equal to R0.001 per
       share (“Rights Shares”), to raise an amount of R10 million, before
       expenses, in the ratio of 273.72002 Rights Shares for every 100 ordinary
       shares held (“Entitlement”) on the record date of the Rights Offer, being
       Friday, 24 August 2018.

 

Extracted from NUT SENS this morning. With this subscription price, does it mean that a shareholder will not be able to sell their N shares?

Bear in mind that companies generally issue more shares for cash for two reasons,
either because they do not have enough funding from retained earnings to grow their businesses ie to take on a new expansion or growth phase assuming that their business is a healthy business.
OR
They are not a healthy business and they are running out of capital to keep going and so approach shareholders for more cash.

In the second instance the shares are offered at a deep discount to encourage shareholders to take up the rights ie stump up the lolly.

Effects of which have already been explained in previous posts.

Sorry for the stupid questions but I always thought that a stock is only devalued when a stock split occurs which makes sense.
But when I read the below article it's got me confused a bit:
"More isn't always better
While issuing new shares of stock may seem like a good idea in theory, it can sometimes have a negative impact on shareholders. When a company issues additional shares, it can cause its existing shares to become diluted. If the total number of shares outstanding increases, each existing stockholder's individual ownership share of the company will become smaller, thus making each share of stock worth less."

"Construction company Basil Read proposes to raise R300m via a steeply discounted rights offer that will see its shares in issue increase 11 times.

It is pricing the rights offer at 22c per share — a third of Friday’s 65c closing price — and offering shareholders 10.35 new shares for every share held."
So am I right in saying because more shares have been issued in to the market the shares are devalued , i.e. If it was 65c before and the shares in issue increases 10 fold it's actually worth 6,5c

so if you owned 100 shares at .65 c before rights offer.....cost = R65.00 right offer shares 1000 shares at 22c = R220.00 total shares = 1100 cost = R285 per share = 26c trading today 21c you worse off by 5c per share

22c

at what price was the rights offer?

Regarding rights offers for example Basil read issued more shares into the market, the share price was 65c then you get 10 shares for every share you own, since then the price dropped to 21c , does this mean that you'll still have made good returns because 10 shares today is worth 220c where as one share was 65c in Feb