NON- Renouncable & REnouncableshare / option Issues :
This post is for the info of DT posterswho may not be familiar with the procedures for acting upon
such Issues, at certain ratios, bysmall- to medium-cap mining & oil stocks.
NON-renounceablemeans you have no opportunity to sell your entitlement to
new shares AND or options offeredto existing shareholders,at a certain price per share/optionby the issuing Company, and giving you the choice of themax. or lesser # you want to take up.
MIning Companies these days tendto make all their new Share & /or Option issues
NON-Renouncable, compared to many? years ago when such Issues were often made as REnouncables.
e.g. lets say you hold 1000 shares in Company X, who’s current SP is $1.10.
It decides to make a NON-Renouncable new issue of shares at a1 for 10 ratio @ 99c.
If you take up your 100 new sharesentitlement you now hold 1100 at a theo value of $1199
($1100 value for your existingshares + $99 for the new ones) = $1.09 theo value / share.
But if you don’t take up yourentitlement you’re left with only your existing 1000 shares - but at the newtheo value of $1.09 = $1090, i.e. you are worse off by $10, invalue, of your unchanged shareholding.
But if the Company makes itsIssue REnouncable,
your 100 shares entitlement, is termed as 100 Rights, having a $10 theo value,
which you can sell on the ASX oncethe Rights are listed, i.e. @ the theo equiv. of 10c a Right.
The buyer of those Rights thenexercises them by paying the Company its 99c per new share,
which alternatively you wouldhave done had you taken them up, & not sold those Rights.
If the Issue is popular, the per Rights value could skyrocket if they become heavily in demand from lots of buyers from much less sellers.
The new shares issued areeventually listed on the ASX of course,
thus becoming tradeable a shorttime after the Issue has closed, and theshares allotted,
just like today’s very common NON-REnouncable share Issues,
particularly by small-cap miners etc.– as stated above - every time they run out of money.
Maybe such REnouncableRights Issues don’t happen anymore, ‘cos thepaperwork for the Companies making such new Issues, even with today’s whizz-bang computer technology,
becomes an unviable andcost-ineffective nightmare for it.
My apols if all the above info isas clear as mud; so clarify the matter with the Share Registry your Companyuses, if you need to.
You can tell I’ve been asharemarket tragic for decades, eh?
