Posting this for 2nd Time as myquery remains unanswered

Others 479 views 2 replies

sivaram

Asst Mgr-Taxation

6918 Points Joined April 2009

May I request Practising Company Secretaries to answer so that a layman like me can understand if possible with numerical examples

Suppose I hold shares in Public Ltd Co say 100 shares.I have been offered 20 Rights Share what and all options are possible from my side

1.I can subscribe for it as the company sends Form which would be less than Market Price

2. I need not Subscribe-Then what happens to my Quota say to that 20 Rights Share-Is it called Renounciation then what the issuing company will do will it reverse the original share issue entries

3.Selling Rights How it is done -First should I subscribe and then only can i sell or I can sell without subscribing for it ?pl clarify

In short I want to know what are the options available to existing shareholder

4.What happens in the Market when Rights shares are announced to existing shareholders will market price go up or down

5.What is meant by Ex Rights and Cum Rights .How will I come to Know whether Rights are ex or cum please explain with numerical examples in a practical scenario in simple wordings so that i can understand this concept

Thanks in advance

Replies (2)

Jaideep

Service

1368 Points Joined January 2009

Hi,

1.I can subscribe for it as the company sends Form which would be less than Market Price

You have to subscribe within given period of time.

2. I need not Subscribe-Then what happens to my Quota say to that 20 Rights Share-Is it called Renounciation then what the issuing company will do will it reverse the original share issue entries

No it is not called as renunciation; your quta will remain unsubscribed.

You can sell your right to buy shares – is called as renunciation

3.Selling Rights How it is done -First should I subscribe and then only can i sell or I can sell without subscribing for it ?pl clarify

You can sell without applying for right shares.

In short I want to know what are the options available to existing shareholder

He can apply for rights,

He can sell his rights

No action- remain unsubscribed

4.What happens in the Market when Rights shares are announced to existing shareholders will market price go up or down

Up to record date it will go up… then it will come down. Also note that right issue will impact EPS of the company.

EX-right means excluding right and cum means including right. Here right means, right to buy shares.

Concerned with, if you are buying shares after company has announced right issue. We need to check whether seller is selling his shares with Ex Rights or Cum Rights.

Regards

Jaideep Pandya

Shridhi Jain

Company Secretary

1678 Points Joined July 2009

1. Yes you can subscribe for the shares as right issue.

2. If you want to subscribe the shares, u can do so by filling the form.

3. I think it is not necessary to get the shares in your name and then transfer the same. You can transfer your right to have right shares to anybody else.

You can avail your right of having right shares or you can transfer your right to anybody else.

4. There are many factors determining the fluctuations of market price of shares. In general sense, Issuing right shares means company is increasing its capital to finance its business. Its a good sign. It indicate that market price of shares should go up but its not mandatory.