Am new to thread here - this is a happening thread. I have a paired trade short BHP, long RIO at present.
Is there an short opportunity with RIO coming up?
Not many seem to be aware that if the $28ish rights are not taken up, then the underwriters have an obligation to use best endeavors take them up and sell the underlying shares, and remit the cash to the holder by cheque on or by the """10th July"""!!!
I'll put the exact wording from the Rights Issue prospectus at the bottom of this post.
I'd love some opinions as to which of the following are likely scenarios: A: Underwriters have already taken up OTC and other put options and warrants - and so market sell pressure has passed already. B: Nearly everybody will have taken up their rights anyway. C: The SP will go down on the 1st or 2nd of July as these stocks flood the market. D: Something else entirely
Curious as to what opinions are out there, if any.
From Prospectus (or whatever it is called):
Option 5: Do nothing If you do not sell your Rio Tinto Limited Rights and we do not receive a valid application for your New Rio Tinto Limited Shares by 5.00 p.m. (Melbourne time) on Wednesday, 1 July 2009, the Underwriters will try to find investors to acquire New Rio Tinto Limited Shares in respect of those of your Rio Tinto Limited Rights not taken up or sold and any other Rio Tinto Limited Rights not taken up (other than those attributable to THA), at a price per New Rio Tinto Limited Share which is at a premium to the aggregate of the Rio Tinto Limited Issue Price and expenses (including any applicable brokerage and commissions and amounts in respect of GST). If the Underwriters successfully place some or all of these New Rio Tinto Limited Shares, the premium (if any) will be aggregated and this amount will be remitted to you on a pro rata basis (net of any withholdings if required by law), while the Rio Tinto Limited Issue Price will be paid to Rio Tinto Limited. You may receive some cash in respect of your Rio Tinto Limited Rights or you may receive nothing, depending on the outcome of this process. • If you have provided direct payment instructions to Rio Tinto Limited in respect of Rio Tinto Limited dividends you will be paid in accordance with those instructions. If you are a participant in Rio Tinto Limited’s Dividend Reinvestment Plan, the direct payment instructions on file may be out of date. To avoid delay in payment we recommend you check, and if necessary amend, your direct payment instructions online at www.investorcentre.com by following the prompts. To use this facility you will need internet access and your Holder Identification Number or Securityholder Reference Number to pass the security features on the website. • Otherwise, you will be paid by cheque sent by ordinary post to your registered address (the registered address of the first-named in the case of joint holders). Direct payments are expected to be made, and cheques are expected to be dispatched, on Friday, 10 July 2009. Neither Rio Tinto Limited nor the Underwriters nor any other person procuring acquirers shall be responsible for any loss, expense or damage (whether actual or alleged) arising from the terms or timing of any acquisition, any decision not to endeavour to procure acquirers or the failure to procure acquirers on the basis so described. The Underwriters will be entitled to retain any brokerage fees, commissions or other benefits received in connection with these arrangements.
