- What are right issues?
- Why would a listed company want to raise capital?
- Why does the company issue rights to shareholders?
- Important points to note
- What are my options as a shareholder if I receive rights?
- Why would I subscribe to a company's capital increase?
- Factors to consider while subscribing
- Important dates
- What happens at the end of the rights trading period?
- What happens at the end of the first subscription period?
- What does uncovered tranche mean (second round)?
- What if there are shareholders who have not participated in the first subscription?
- Difference between first and second round
- What happens after the subscription period end
- What are the risks of not selling and subscribing in the rights issues?
What are right issues?
Rights issues are an invitation from a listed company to its shareholders to participate in increasing the company's capital by purchasing new shares.
- The invitation is usually exclusive to the company's shareholders and is valid for a limited period of time.
- The shares are purchased at the par value, which is often lower than the market price of the shares.
- The number of new shares that shareholders are allowed to purchase is proportional to the number of shares they currently own.
Why would a listed company want to raise capital?
- Funding new projects.
- Debt coverage.
Why does the company issue rights to shareholders?
- Rights are issued to compensate shareholders for the difference between the market value and the subscription price of the new shares, which is usually lower than the market price.
Important points to note.
|Percentage of rights to shares|
- Each share you own entitles you to a certain number of rights to purchase new shares.
Number of shares before and after capital increase Ex-right date
The shareholders who own shares in the company at the end of the trading day on the ex-right date are eligible for subscription rights.
- This date can be found in the prospectus.
- As a shareholder, you have the option to sell your rights within a certain period if you do not wish to purchase the new company shares. It also means that if you were not a shareholder at that time, you have the opportunity to buy those rights from the market and thereby become eligible for subscription and purchase the new shares at the subscription price.
What are my options as a shareholder if I receive rights?
Option 1: Sell the rights during the trading period.
- You should find the rights you are entitled to in your portfolio. The right is represented by a symbol consisting of the company ticker in addition to "_r".
Option 2: Do not sell the rights and participate in the subscription.
- Open the email you received from Thndr, which contains important information about the subscription (ex-right trading date, subscription deadline, subscription price per right, and the subscription application form).
If Thndr is your custodian
- Fill out the subscription form in the email, and your request will be recorded.
- Your account should be funded with the necessary value for the subscription (number of rights × subscription price per right).
- Custodian Charge: 20 EGP (Exempted for Express Egypt Subscribers)
If the Ahly United Bank is your custodian
- Submit a request to our support team to release your rights.
- Obtain a personal account statement from a branch of Ahly United Bank.
- Submit your application at any of the bank branches responsible for collecting subscriptions.
- Inform our support team once you have submitted your subscription request.
- The wrong course of action is not taking any action, as you will lose the value of the rights you own.
- Please note that the process of converting rights into company shares is not immediate and may take 1 to 3 months.
Why would I subscribe to a company's capital increase?
|Confidence in the company |
- If you have confidence in the company's future growth prospects, participating in the subscription allows you to maintain or increase your current stake.
- Subscribing to the company's shares enables you to hold the shares for a long period. If you believe in the company's strong fundamentals and expect its value to increase in the future, the subscription provides an opportunity to benefit from potential growth.
- By subscribing, you can potentially acquire more shares at a lower cost than purchasing them straight from the secondary market.
Factors to consider while subscribing
- Evaluate the company accurately, including financial analysis, historical performance, and future trends. Review the latest news and financial reports of the company to understand the current situation and upcoming developments.
- Determine your investment objectives and personal financial needs.
- Assess the current market conditions and market expectations.
- It is advisable to consult with a professional financial advisor before making a subscription decision.
Understanding the Theoretical Value of Shares
- Understand the value of the right and the subscription time.
- Announcement date
- Ex-Rights date
- Start of trading date
- End of trading date
- Subscription end date
What happens at the end of the rights trading period?
- You will not be able to sell your rights anymore.
What happens at the end of the first subscription period?
- Those who do not sell their rights or subscribe to them at the end of the first subscription period will lose the value of the rights.
What does uncovered tranche mean (second round)?
- Uncovered tranche refers to what occurs when shareholders do not sell their rights or subscribe to them before the end of the first subscription period.
What if there are shareholders who have not participated in the first subscription?
- In such cases, the company may decide to have a second subscription round. In this round, any shareholder can subscribe to any number of rights they want, regardless of the amount of rights they currently hold.
- It is not a rule that a second subscription round will be opened. It is the decision of the company that is increasing the capital.
Difference between first and second round
- You can only subscribe to the amount of rights you own
- You have a longer period to make a decision.
- There is no oversubscription.
- You can subscribe for any number of shares (provided that you hold at least one subscription right from the initial subscription).
- Shorter time period.
- Allocation as a result of oversubscription can occur which can result in the reduction in shares received due to the amount subscription requests exceeding the remaining amount of unsubscribed rights
What happens after the subscription period end
Allocation can occur
- Shares received may be lower than expected due to the high demand in subscription, resulting in users receiving an amount of shares proportional to their subscription request.
- Conversion of rights into actual shares may take 1-3 months after the end of the subscription period.
What are the risks of not selling and subscribing in the rights issue
Risks of Subscription
- Risk of share value decline.
- Risk of investment failure.
- Subscription value is locked for a considerable time period, money that could be needed for emergencies or other investment opportunities.
Risks of Selling rights
- Risk of missing out on an opportunity.
- Risk of declining value of share rights.
- Risk of market fluctuations.