Friday, 15 May 2020

What should you consider and steps to take for SIA Rights Issue

SIA did a Rights Issue of Rights Shares and Rights MCBs. I am not vested but because so many friend are asking, I thought I should share on these.



RIGHTS SHARES
Based on the Record Date (5 May, 5pm), for every 2 SIA shares, you will get 3 rights shares. If you have 1,000 SIA shares, you will be alloted 1,500 rights shares. You can check your online CDP account if you are unsure. 

These rights shares are re-nounceable. This means that they can be traded from now till 21 May 2020, 5pm. The symbol for the rights share is “LRDR”, under the name "SIA R". 

As the issue price of the one rights share is $3, the price of the rights share is affected by the price of SIA shares. Due to market efficiency, the formulae for price of rights issue is: 
Price of rights issue = price of SIA share - $3
For example: if SIA share is trading now at $3.80, the rights shares will trade at around $0.8 and below. 
If SIA shares trade below $3 during this period, the rights shares will trade at $0.001 because it is cheaper to buy SIA shares directly instead of the rights.

If you have the rights shares, you can do one of the following:
a) Sell your rights shares (before 21 May, 5pm)
b) Exercise and payment for your rights 
You need to pay $3  per right share. Payment can be made online at SIA website (before 28 May, 5pm) or at ATMs (before 28 May, 9.30pm)
On 8 Jun, you can trade them as SIA shares via symbol "C6L". 
c) Buy more rights shares and then proceed with (b) 
Another method: If you want more SIA shares, more than what you are allotted with, you can make payment for excess shares. The excess is subjected to allocation, with priority given to rounding up to hundreds. 
d) Do nothing
If you are planning to do step d) as you are disappointed with SIA, do consider doing step a).

RIGHTS MANDATORY CONVERTIBLE BONDS (MCBs)
Based on the Record Date (5 May, 5pm), for every 100 SIA shares you will receive 295 rights MCBs. If you have 1,000 SIA shares, you will be alloted 2,950 rights MCBs. You can check your online CDP account if you are unsure. 

These rights shares are re-nounceable. This means that they can be traded from now till 21 May 2020, 5pm. The symbol for the rights share is “GANR”, under the name "SIA MCB R". The issue price of the rights MCB is $1 per share.

This is a zero-coupon conversion bond which means that there will be no interest payments. At maturity, after 10 years, the maturity amount for 1,000 units of MCBs is $1,806.11. As this is a conversion bond, the maturity amount will be converted to SIA shares at conversion price of $4.84 per share (subjected to adjustments such as consolidation or subdivision of Shares, capitalisation of profits or reserves, capital distributions, dividends, share repurchases and others). 
If there are no adjustments, in 10 years:
1,000 units of MCBs = $1,806.11 = 373.16 SIA shares 

1st two columns from SIA Announcement 

SIA can recall the MCBs early at a predetermined yield of between 4% to 6%. 

Due to the nature and issue price of MCB , it is currently trading at $0.001. 

If you have the rights MCBs, you can do one of the following:
a) Sell your rights MCBs(before 21 May, 5pm)
If you can still make a profit after deducting commission.
For example if you have 20,000 SIA shares, you will get 59,000 rights MCBs. If you sell the rights at $0.001, you will get $59, excluding commission.
b) Exercise and payment for your MCBs 
You need to pay $1 per right MCB. Payment can be made online at SIA website (before 28 May, 5pm) or at ATMs (before 28 May, 9.30pm). On 9 Jun, you can trade the MCBs.
c) Buy more rights MCBs and then proceed with (b)
Another method: If you want more SIA shares, more than what you are allotted with, you can make payment for excess shares. The excess is subjected to allocation, with priority given to rounding up to hundreds. 
d) Do nothing

Please do your own due diligence on the steps to embark on after reading this. 

SIA has published a full advertorial on the rights issue on The Straits Times.
From The Straits Times (page A5, 15 May 2020)

1 comment:

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