Monday, December 22, 2008

DBS rights issue

DBS halt trading early this morning and rumors are flying about as to what is the actual reasons for the trading halt. I thought that DBS will be settling the troubled bonds issue today, as the relevant authorities mentioned that an answer would be made at the end of this month. But that was not the reason for the trading halt. The real reason caught me a little by surprise.

DBS announced that it is going to raise capital to the tune of SGD 4 bil by issuing rights shares to existing shareholders. Rights exercise is basically an attempt to raise capital from exisiting shareholders by granting them an entitlement to buy additional shares at a discounted price. There are a few things that are important in a rights issue, and I take this chance to share with you what I know about it.


These are the few things you need to know:

1. Rights ratio

DBS are offering rights shares at a one-for-two ratio, which means that for every two pre-rights shares that you have before ex-rights (XR), you will be entitlted to apply for one more rights issue at the rights issue price of $5.42, a discount to the last close of $9.37 today. This means that for every 2 lots of DBS shares you own before XR, you'll need to pay $5,420 to get your entitlement of 1 lot of DBS rights shares.


2. Nil paid rights

The rights shares will commence trading as 'nil-paid' rights on 6th Jan 2009. As the name 'nil-paid' suggests, it means that you haven't paid for the rights yet. The rights will trade in the open market with its own quotation and symbol. Basically this system caters for 3 types of people:


a. Those who are already shareholders at XR and do not want to pay for the rights. The thing goes like this, whether you want it or not, you'll be given the nil paid rights. If you want to subscribe to it, you can do so by accepting it and paying for it before 20th Jan 2009 (last date for acceptance). You can even subscribe to excess rights beyond what is entitled to you too, but it might not be successful. For those who do not want the nil-paid rights (i.e. do not want to accept the rights shares and pay for it), you can sell it in the open market. The last date of trading for the nil paid rights is 14th Jan, 2009. Which brings us to the next category...


b. For those shareholders who want to make sure they can get excess rights shares without bidding for it (and thus subjecting to chance), they can also buy the nil paid rights direct from the open market. Of course, if you subscribe to excess rights and bid for a chance to get it, you'll only pay $5.42 for each right. But if you buy from the open market, you have to pay the market price of the right PLUS a fixed $5.42. Might not be so cheap.

c. Those who are not DBS shareholders at XR but want to buy the nil paid rights at open market. Basically these arbitrageurs will look for opportunities to buy the rights cheaply, waiting for the nil-paid rights to become ordinary shares on 2nd Feb 2009, then profit (or lose) the difference.

However, do not be mistaken that the nil paid rights will be trading at the rights issue price of $5.42. If we take the post-rights price of DBS to be $8.37 (as mentioned in the announcement), then the nil paid rights should be trading at around $2.95 range (8.37 - 5.42 = 2.95). DO NOT assume that it's cheap - it might not be!

For example, if we buy the nil paid rights off the market at $2.90 per share (this varies according to market forces), then pay another $5.42 per share (this is fixed) to convert it to ordinary shares, our cost of each new share of DBS will be $8.32. There's no brokerage involved so that is truly our cost. If after the new shares commence trading on 2nd Feb 2009 at a price of $8.37, we basically earn $0.05 per share (8.37 - 8.32 = 0.05) excluding brokerage involved in selling. To succeed in this arbritrage opportunity, we have to guesstimate the price of DBS on 2nd Feb, then minus off 5.42. Any price lower than that is a good bargain, pre brokerage charge.


3. The theoretical post-rights price of DBS on 2nd Feb 2009

If you've been in the market for long, you'll realise that 'by right', the price can be this and that, but 'by left', all is not right. Oh well, in theory, because DBS is offering 1 new shares for every 2 existing shares, they are going to dilute their earnings and dividends by a factor of 2/3, which is quite substantial for those who are shareholders but chose not to subscribe for the rights. This means that if the earnings is say $3 per share pre-rights, the new earnings will be $2 per share post-rights. Dividends yield too, if their dividend yield per annum is say 6%, the new dividend yield will be 4%. Ouch.

Anyway, here's how to calculate the new share price of DBS when the rights shares commence trading on 2nd Feb. Today, DBS closed at $9.37, so let's use this price. The formula is:

New share price of DBS = (2 x 9.37 + 5.42) / 3

If we take DBS's closing price to be 9.85, then using the calculation, we end up with the post rights share price of DBS at 8.37 per share. However, do take note that the actual price will be swayed by more than just mathematical calculations, hence it might not be what is calculated. Be aware of the risk of arbitraging!


There's a whole lot more details that I missed out, so for those who wished to find out more, do visit my newbie's FAQ. Alternatively, you can visit the same version in this blog over here.

Now I worry about HSBC's possible capital injection through rights too. Will I be able to subscribe to it because I'm a foreign investor?

77 comments :

Arsenalnfriends said...

so if i have 1000 shares, can i exercise my rights and buy 500 shares?

If not, what other options do i have if i do not want to sell my rights?

la papillion said...

Hi Arsenalnfriends,

If you have 1000 shares (1 lot), you can exercise your rights to buy 500 shares. However, I would also apply for an excess rights of 500 shares in addition to the 500 which I'm entitled to. This is to top up the 500 shares to make up a full lot of 1000 shares so that it will make it easier to divest in the future. Otherwise, the 500 shares cannot be sold in the open market but have to be sold in the unit share market, which is more illiquid and more inefficient - which translates to a wider bid spread. Your chances of successfully getting the excess rights shares will be higher because priority will be given to those who do not have a round lot, so if you have the capital, why not?

Your first question had been answered, hence the next question isn't applicable.

ArchAngel said...

Something doesn't sound quite right here. If DBS mother share still stay around the $9.20 mark on 6 Jan (commencement of trading of the nil-paid rights) and the rights are trading at the 2.95 mark (in your example), can't i just sell off the rights and the DBS share itself at a free profit of the rights value? Shouldn't DBS be trading lower at XR?

la papillion said...

Hi Archangel,

You're right. I can't remember when DBS shares will drop in price but I think it's what you mentioned, that is DBS shares will drop in price when it declares XR and not when when the rights get converted to ordinary shares and begin trading in feb.

Thks for correcting me!

Anonymous said...

I am not a DBS shareholder.
With the price now of $8.20, can I say the, nil-paid right breakeven is 8.2-5.42 = 2.78 ?

Which means, if I buy nil-paid right in the market, say $2.78, I would also need to pay $5.42 for 1 lot share, right?

Then, what is the point to buy DBS right now at $8.2 and buy DBS nil-paid right at market price and pay $5.42 extra to convert to DBS share?

Unless, after the paid right, the mother shares is more than $9 then, you are at the gain side.. if that is the csae, isn't it, just to buy DBS now at $8.2 and save all the hassles? correct me if i am wrong.

la papillion said...

Hi anonymous,

With the price now of $8.20, can I say the, nil-paid right breakeven is 8.2-5.42 = 2.78 ?

ANS: Yes. That is if the price is really 8.20 for DBS shares after all the rights exercise.

Which means, if I buy nil-paid right in the market, say $2.78, I would also need to pay $5.42 for 1 lot share, right?

ANS: Yes.

Then, what is the point to buy DBS right now at $8.2 and buy DBS nil-paid right at market price and pay $5.42 extra to convert to DBS share? Unless, after the paid right, the mother shares is more than $9 then, you are at the gain side.. if that is the csae, isn't it, just to buy DBS now at $8.2 and save all the hassles? correct me if i am wrong.

ANS: In an efficient market, there shouldn't be any difference between buying the rights or buying the mother shares. In an inefficient market, there is a chance to arbitrage on the price difference between the rights and the mother share, as you correctly mentioned.

If you buy the rights share at the correct price, there is a chance to profit, which is the advantage of getting the rights DBS shares over the mother DBS shares. But there is also a possibility that buying the mother DBS shares is a better bargain.

Anonymous said...

$8.81 1000 $8,810.00
$8.81 1000 $8,810.00
$5.42 1000 $5,420.00
$7.68 3000 $23,040.00

Let's take the best case scenario, if one bought cheapest on Dec 22 at price of $8.81 , 2 lots, so, after the right issue, the average price is $7.68 (3 lots)

If we want to beat the "best scenario", let's watch the nil-paid right price, if it is below 2.26, I would say, you got the best deal , 52 weeks lowest. Am I right?

it seems like 2.26 would be our benchmark.

Oh yeah, if I bought the nil-paid right on the market at 2.26, when should I pay the $5.42 ? in February?

Anonymous said...

I understand that we can apply for the rights through ATM or by post. Can we use internet banking to apply?

la papillion said...

Hi anon 29th Dec 11:14:00 AM,

I don't get you. Why do you need to buy the mother share at 8.81 on Dec 22 before you get the best scenario? You can just get the nil paid rights off the open market when they begin trading.

I can't comment on whether 2.26 is the best deal, because it depends on how you want to profit from it:

1. You can profit by trading the nil paid rights. E.g. You can buy at 2.26, then sell at 2.30 to profit 0.04.

2. You can profit by buying the nil paid rights at 2.26, then wait for the rights to convert to ordinary shares and for them to begin trading as normal DBS shares. Then sell off. Of cos, you'll run the risk of the shares being lower than 2.26 + 5.42.

You have to pay the 5.42 (aka accepting the rights issue) latest by 20th Jan 2009. That is the last date for acceptance of rights shares and the last date for application for excess rights.

You can check the time line here:http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_00A6561893DEB594482575270016ADAE/$file/MediaandAnalystPresentation.pdf?openelement

page 4 out of 9

la papillion said...

Hi anon 29 dec 12:08:00 PM,

I do not think you can use internet banking. Honestly, can't really remember. I only remember you can do it through posting cheque (troublesome) or through ATM.

It's not a hassle gng through ATM, the whole process takes less than 5 mins.

Anonymous said...

Hi guys

need your advice as i'm totally new to share trading.

dbs today (29 dec) was trading around $8.30 so i went in a bought 2 lots without doing much research.

Q1: am i entitled to the $5.42 rights for my purchase today?

Q2: at $8.30, is there any chance i get make some short term profits?

Q3: if i hold my current shares, when is the next dividend payout?

thanks in advance for the advice

Anonymous said...

The reason why I asked for internet application is that I will be out of town during the rights application period. Not too sure if I want to sell the rights or exercise it. In case I am stuck with it and have to exercise it, internet banking would be a convenient way as I can still do it when I am overseas.

la papillion said...

Hi anonymous 12:22:00 AM,

Q1: am i entitled to the $5.42 rights for my purchase today?

ANS: Nope, sorry. I think the shares went XR today, so you're not entitled to the rights issue anymore.


Q2: at $8.30, is there any chance i get make some short term profits?

ANS: Short term profit? not that I know of. Selling above 8.30, inclusive of brokerage to break even?


Q3: if i hold my current shares, when is the next dividend payout?

ANS: According to past dividends records, the dividends are given in april, may, aug and nov. So I guess april 2009 is the next dividend payout.

la papillion said...

Hi anonymous 1:11:00 AM,

I think no choice loh. Might have to ask someone to help you do it by post or atm. The last date is 20th Jan 2009, so plan accordingly.

Good luck :)

Anonymous said...

hi la papillion

thank you very much for the answers.

have a good week ahead!

Anonymous said...

I would like to understand some right issue topic again, regarding the United Engineer shares..

okay, 3 convertible bonds at $1.00 each for every 5 ordinary stock units. convertible bonds due 2014.

My question is:
(1) from now until 2014, will they have another index monitoring the price movement of right issue price?

(2) convertible into stock units based on conversion price. Does this statement refer to year 2014? how does this right issue convert to mother share?

I hope you can shed some lights to me on this too.. thank you.

la papillion said...

Hi anonymous,

1) I've had experience with yongnam rights issue, where they issue shareholders with a convertible warrants due on a certain date as well. They do have a separate counter which monitors the price of the warrant, it's called YN W121214.

I suppose that for your case, it will also be the same.

2) It depends on the terms, which will be stated clearly in the offer information statement (OIS) that is mailed to you. I'm not so sure. Convertible due 2014 could mean you can convert to ordinary shares anytime before 2014. Not sure what will happen to it if you do not exercise the convertibility option before 2014. This, you will have to read the OIS.

To convert to mother share, you have to write in to an address also stated in the OIS to the agent. No way to do it online. Read my faq: http://bullythebear.blogspot.com/search/label/Newbies%20FAQ, question 16

Anonymous said...

thanks for the info..
talking about YongnamW121214... isn't that a Warrant? it will expired only on Dec 12, 2014 ? with the warrant price now only 0.01.. I think it is much better to buy warrant now than the mother shares, I do think 5 years from now... YongNam will definitely rise one more round.. what do u think , warrant and mother shares, risk analysis..

Anonymous said...

sorry, it should be 2012 dec 14.. then, that is a bit risky..

la papillion said...

Hi anonymous,

I think the risk of buying such thing is rather high. I would rather put more money into decent companies than lesser money into a derivative of a so-so company. Do take note that unless you plan to trade the warrants, you need to pay a price to convert the warrant to ordinary yongnam shares. I can't remember how much the conversion price is cos it's so long ago.

I would not buy either the mother shares or the warrant :) But that's just me lah :)

Anonymous said...

I wanted to apply for an excess rights of 500 shares in the open market to make my share become round lot. what should i do?

la papillion said...

Hi anonymous,

Hmm, there are two ways to get your excess rights of 500.

1. Apply thru open market as you mentioned. Look for the relevant counter on 6th Jan, the day the counter is traded openly and just buy it.

2. Apply for excess thru a form that will be sent to you soon. They are posted the offer information statement (OIS) online here: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_8BC2E4C469439B9B48257532000AD6B6/$file/DBSH_OIS_31Dec2008.pdf?openelement
Look under section E1.

For either case, you still have to pay 5.42 for each right shares by a certain dateline, so make sure you do that.

wong mg said...

Hi La papilion,

Please correct me if i'm wrong,
i guess there have one more option for subscribing the excess right of 500 share is through the ATM if the person is a shareholder of DBS.

la papillion said...

Hi Wong mg,

Yes, i believe so. I think applying thru ATM is the fastest. Sorry, forgotten about it :)

Had 2 experiences on rights exercises, both of which I applied using ATM.

wong mg said...

Hi La papilion,

Please do not said sorry, actually i have learned a lot from your blog. please continue to share your knowledge and investment wisdom.

You are a great man.

Cheer!!!

la papillion said...

Hi wong mg,

Haha, you flatter :) Thanks for visiting :)

Anonymous said...

Hi la papillion,

A belated Happy New Year to you. I'm still green in this shares and stocks things. I chance upon your blog and truly it has helped me a lot. Presently I'm posted oveseas till March'09 and since I own 4 lots of DBS shares before XR (around October), I guess that I will be issued 2 lots of right shares. My query is about the payment transaction. Since I'm not back home I've instructed my brother to make full payment via a bank draft or cashier's order using his bank account. Will CDP accept the bank draft or cashier's order as payment when I'm not using my own bank account to settle payment? I've no problem with the application form as he will post it to me and after duly completed will return it back for him to post to CDP with the bank draft. Thought of sending back my ATM card but opps my ATM card is unserviceable due to my negligent.

la papillion said...

Hi there,

Glad my blog is of help to you :)

Take a look at this: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_8BC2E4C469439B9B48257532000AD6B6/$file/DBSH_OIS_31Dec2008.pdf?openelement

pg 135 of 166, section E-2, under mode of acceptance and application.

I think if your brother applies through a form called ARE, which is mailed to you together with the Offer information statement (OIS), and then subsequently mail a cheque to the stated address so that it arrives not later than 5pm on 20th Jan 2009, it's ok.

Since I'm not a qualified advisor on this issue, do seek their official helpline at 1800-111-1111 to confirm what I had asked. The helpline is lifted from page 6 of 166 of the link that I've shown you earlier :)

Anonymous said...

Hi La papilion,

I have 1 lot of DBS before it XR. If I sell away my 1 lot today (5 Jan), am I still entitled to the rights? Can I still sell the rights when the market open tomorrow (e.g. 6 Jan)?

Thanks.

la papillion said...

Hi,

If I'm not wrong, if you're still a shareholder before it went XR, you're entitled to the rights. To be very sure, check out the online CDP account and verify that the right shares are already credited into your account first. OR you can wait till they mail you the offer information statement (OIS) together with the ARE form (just a form that states the amt you have and the option to accept it or apply for more rights).

If you have the rights in, then you can sell the DBS mother shares. You can also sell the rights shares anytime you like when the nil paid rights go on trading. Should be listed under DBS R or DBS R500.

Anonymous said...

Thanks La papilion. I just want to make sure that I don't short sell the rights. : ). DBS has been rising these few days, tempted to take some profit off the table. If the price for the nil-paid rights is attractive, I will sell that too. I assume there will be brokage cost involved in selling the rights through POEMS.

Anonymous said...

Hi, I am overseas now and I do not have a CDP online account. Can my broker check on my behalf to see if the rights has been credited to my CDP account? TIA.

la papillion said...

Hi 11:09:00 AM,

Yup, there should be brokerage charges involved when selling/buying rights in the open market.

la papillion said...

Hi 11:37:00 AM,

I highly doubt that your broker can check that. That's because they only have access to your trading account and not your CDP account. You can try asking though.

If not you have to wait for the mail to be sent. I think should be this week, since last fri they posted the OIS online.

Newbie said...

Hi,

I have some questions as follow.

1. Am I right to say that Rights will expire. If so, how do I know when it will expire? And what happen when it expires?

2. If I do not want to buy the DBS Rights but sell it as nil-paid Rights, for example, at $5.80, do I get the difference of $5.80 and $5.42? What happen if I sell at $5.00? How does it works?

Thank you for the advise and help.

la papillion said...

Hi newbie,

1. Am I right to say that Rights will expire. If so, how do I know when it will expire? And what happen when it expires?

ANS: Rights that you haven't accepted or paid for are called nil paid rights. Nil paid rights will expire if you do not accept it within a limited time period. I think for dbs is up till 20th jan (check the timeline again, i'm just quoting from memory). If it expires and you didn't accept it (or pay for it), then you won't lose money, since you didn't pay for it. But you'll lose profit, because if you do not want to accept it, you should just sell it off the open market for profit.


2. If I do not want to buy the DBS Rights but sell it as nil-paid Rights, for example, at $5.80, do I get the difference of $5.80 and $5.42? What happen if I sell at $5.00? How does it works?

ANS: No, you do not get the difference of 5.80 and 5.42. You see, when they issue you the rights, it's free and you do not have to pay anything yet. BUT if you choose to accept it and pay for it, then you'll have to pay $5.42 for it. Take the $5.42 as the fee to convert the rights to ordinary shares. If you don't pay up, the rights will expire.

Since you do not cough up any money to buy the rights that you're entitled to, any price that you sell off the market MINUS brokerage will be your profit. If you sell at $5 per right shares, then you get that amt of profit after accounting for brokerage. There's no need to minus $5.42. Here, I'm assuming you're entitled to the rights i.e. you're a shareholder before DBS went XR.

Newbie said...

Hi,

Thank you for the reply and advise given.

I actaully received a letter yesterday from DBS for my entitlement of the Rights. I am entitled for 500 Rights Shares. I have the following concern.

1. I understand there is an expected date where the Rights commencing trading on the 2nd Feb 2009, as mentioned in the Offer Information Statement (OIS). Does that means if I puchase the Rights now, I can start trading the Rights as Mother/Ordinary Shares under the share price of DBS Holdings from 2nd Feb 2009?

2. Will it be a problem to sell the Rights if I am holding odd lots of Shares, in this case 500 Rights Shares.

Thank you.

la papillion said...

Hi newbie,

1. I understand there is an expected date where the Rights commencing trading on the 2nd Feb 2009, as mentioned in the Offer Information Statement (OIS). Does that means if I puchase the Rights now, I can start trading the Rights as Mother/Ordinary Shares under the share price of DBS Holdings from 2nd Feb 2009?

ANS: Yes, that's right.

2. Will it be a problem to sell the Rights if I am holding odd lots of Shares, in this case 500 Rights Shares.

ANS: If you're selling the nil-paid rights, there won't be a problem because between 6th Jan to 14th Jan, there is a counter named DBS R500. That's for people to sell their 500 rights before it gets converted to ordinary shares on 2nd Feb.

However, after the trading period of the nilpaid rights, there normally won't be such a provision (unless it's stated in the OIS..i didn't read it).

I suggest you apply for excess rights to top up to 1000 rights, after which it'll be one exact lot of DBS shares. Otherwise, once your 500 rights become 500 ordinary shares, you'll have to divest through the unit share market. Not too liquid.

Newbie said...

Hi,

Thank you for your advise again. You have been very helpful, appreciate that :)

One other question. When the Rights are converted to Mother Shares on the 2nd Feb 2009, does the Mother Share Price usually drop at that time due to Shares Dilution?

I am actually holding 1 lot of DBS Shares at $8.98. I was thinking to sell it off at this time together with the nil-paid Rights. Then wait for 2nd Feb where the Rights is traded as Mother Shares, and see if the price will drop lower than my initial purchase price of $8.98. If it does I will buy in again. What do you think of the above plan?

Thank you.

la papillion said...

Hi newbie,

You're welcome :)

One other question. When the Rights are converted to Mother Shares on the 2nd Feb 2009, does the Mother Share Price usually drop at that time due to Shares Dilution?

ANS: No, at least not theoretically. The share price already dropped when DBS announced XR, so the dilution effect had already been factored in. It's just that this crazy (short term) bullish sentiment drove it up so high.


I am actually holding 1 lot of DBS Shares at $8.98. I was thinking to sell it off at this time together with the nil-paid Rights. Then wait for 2nd Feb where the Rights is traded as Mother Shares, and see if the price will drop lower than my initial purchase price of $8.98. If it does I will buy in again. What do you think of the above plan?

ANS: I think it's a good plan. You lock up your profits first, then wait for it to come down again. However, do note the risk of the stock running up without you.

Newbie said...

Hi,

Thank you again for your advise :)

I have a clearer picture now :)

Thank you.

cz said...

hi

im holding 1 lot of dbs shares as well, and i was wondering, how do i sell of this rights shares? i'm curretnly entitled to 500 of them, and would like to sell them off. Does it mean i can sell them off now (although not reflected in my account) or do i have to buy it first before selling it?

thanks!

cz said...

hi

im holding 1 lot of dbs shares as well, and i was wondering, how do i sell of this rights shares? i'm curretnly entitled to 500 of them, and would like to sell them off. Does it mean i can sell them off now (although not reflected in my account) or do i have to buy it first before selling it?

thanks!

la papillion said...

Hi cz,

If you're sure that you're entitled to 500 right shares, you can look for this counter DBS R500 in the open market and sell 1 lot of it. You do not have to buy and sell it since it's already in your CDP account. To verify, do check your CDP online account to make sure the rights share are there first.

If in doubt, do check the OIS. There's a wealth of information inside. And frankly, I didn't read it but answered based on memory and my prior experience dealing with rights issue.

Take care!

cz said...

hi thank you! i checked with CDP and indeed the shares have been credited into my account. I will be selling them off once the price is right! thanks so much !

Anonymous said...

Hi,

I am very "green" in right issue and glad that I found your blog. There are indeed great help after reading all the info here.

However, I still have questions, please bear with me:

1. If I send my 500 rights in DBS R500, let's say the current price is $3, do I get back $1500 minus brokerage or $3000-brokerage?

2. Currently I am entitled to 500 rights, can I apply for an excess rights of 1500 to make up with 2000 shares? Any idea what is the chances of getting another 1000 share in excess(other than the 500 to round up my entitlement)?

la papillion said...

Hi anonymous,

1. If I send my 500 rights in DBS R500, let's say the current price is $3, do I get back $1500 minus brokerage or $3000-brokerage?

ANS: It should be $1500. The R500 is trading as 500 shares per lot, so it's 3 x 500 = $1500.


2. Currently I am entitled to 500 rights, can I apply for an excess rights of 1500 to make up with 2000 shares? Any idea what is the chances of getting another 1000 share in excess(other than the 500 to round up my entitlement)?

ANS: The chances depends on how many pple didn't take up their allocated rights. If there are a lot of such pple, then the chances will be higher. Priority will be given to those who are rounding up to one full lot, like yourself (from 500 to 1000). But it's just a priority, not an entitlement. There's still a chance of not being offered anything by applying.

The 1000 extra rights will be of lesser priority, of course. No idea what's the chances though. I would say just try for it if you want. No harm if you can pay for it.

Daniel Goh said...
This comment has been removed by the author.
Anonymous said...

Hi,

I have just bought a DBS R at $2.95 today. When will I need to pay for it? Is it only by 20 Jan when the dateline comes for exercising my Rights?

Tks in advance.

Anonymous said...

If I have bought a DBS R shares from the open market and convert it, is it for 500 shares only?

Means I should but the DBS R500 also to make up 1 full lot?

la papillion said...

Hi anonymous 5:19:00 PM,

I have just bought a DBS R at $2.95 today. When will I need to pay for it? Is it only by 20 Jan when the dateline comes for exercising my Rights?

ANS: If you buy it now, then you are subjected to 2 charges. First is the brokerage charge and price of the rights which you have to pay within T+3 (usually). So since today is Fri, then T+3 due date is on next wed.

The other charge is the $5.42 per share that you need to convert the rights to ordinary shares. The last date to accept the rights and pay for the conversion is on 20th Jan, 5pm.

la papillion said...

Hi anonymous 5:29:00 PM,

If I have bought a DBS R shares from the open market and convert it, is it for 500 shares only?

Means I should but the DBS R500 also to make up 1 full lot?

ANS: DBS R is for 1000 shares. DBS R500 is for 500 shares. U can either buy 2 lots of DBS R500 or 1 lot of DBS R shares. I suggest just get 1 lot of DBS R if you want to get 1000 shares of DBS.

Anonymous said...

What if I have paid for the rights by T+3 and not paid for the conversion by 20 Jan?

la papillion said...

What if I have paid for the rights by T+3 and not paid for the conversion by 20 Jan?

ANS: Then you just bought yourself some useless but expensive electronic scrips.

Anonymous said...

Dear LP,
Please answer one more query about DBSR buy in open market. Cost of DBSR paid to brokerage house. How about the amount -convert rights to share S$5.42 /spare - brokerage house or CDP?

With rgds and thanks

la papillion said...

Hi anon,

Please answer one more query about DBSR buy in open market. Cost of DBSR paid to brokerage house. How about the amount -convert rights to share S$5.42 /spare - brokerage house or CDP?

ANS: I'll give an example. Say you buy 1 lot of DBS R at $3.00. That means you have to pay 3 x 1000 = $3000 (exclude brokerage for simplicity) for the rights that you buy from the open market. Before the last day for the acceptance and payment of the rights, you'll have to pay $5.42 per rights share to convert them to ordinary shares. This is means another 5.42 x 1000 = $5420. No brokerage charges for this.

In total you need to pay 3000 + 5420 = $8420 per lot (exclude brokerage). Which means that if you wish to cash out after all this hullabaloo, you need the DBS mother share to be above $8.42 before you break even. Add a few more cents to cover brokerage for the selling too.

This is vastly different if you are an existing shareholder before DBS went XR, in which you are entitled to the rights. In other words, the rights are already given to you, hence you do not have to pay the $3000 to buy it off the open market. However, the 5.42 per right share to convert is still applicable, hence you just need to pay $5420 per lot.

Anonymous said...

Hi,

What if I bought a DBS R shares on mon (12 Jan) and do not pay up by T+3?

Anonymous said...

Hi,

Do you know whether I can start paying the $5.42 today instead of waiting till closer to te 20 Jan?

la papillion said...

What if I bought a DBS R shares on mon (12 Jan) and do not pay up by T+3?

ANS: Then like all shares, your holdings will be forced sold by your broker. Perhaps subject to penalties too.

la papillion said...

Do you know whether I can start paying the $5.42 today instead of waiting till closer to te 20 Jan?

ANS: Yes, you can. The last date is 20th Jan.

Anonymous said...

Dear anyone,

I bought 500 DBSR500 @$2.65 today. I was clueless on what they were, honestly.

After reading your post, I got some idea that I have to pay up another $5.42 per DBSR if I want to convert to the mother share.

1. What do recommend is the best course of action for me to keep my costs minimal?

a. Can I just retain the DBSR500 rights and sell them off when they go up sometime - either now or later or would they be worthless once the rights issue is subscribed ?

2. Would I be subjected to brokerage charges for both the DBSR500 purchase and again when I convert them to normal DBS shares?

Thanks

la papillion said...

Hi,

1. What do recommend is the best course of action for me to keep my costs minimal?

a. Can I just retain the DBSR500 rights and sell them off when they go up sometime - either now or later or would they be worthless once the rights issue is subscribed ?

ANS: I think if you have no intention to pick it up, you should sell it. Treat it like trading a counter. Do take note the nil-paid rights will cease trading on 14th Jan at 5pm. After which, you're stuck with it. I suggest you quickly dispose of it in between now till 14th Jan.

If you do not accept the rights by paying 5.42 per rights share, the rights you bought will be deemed worthless. If you do pay up, the rights will be converted to DBS ordinary shares on 2nd Feb.


2. Would I be subjected to brokerage charges for both the DBSR500 purchase and again when I convert them to normal DBS shares?

ANS: You'll be subjected to brokerage charges on the DBSR500 purchase, BUT not when you convert to DBS shares when paying 5.42 per rights shares.

Hey, next time, don't do silly things like this. It's dangerous and nerve wrecking, not to mention it's wallet breaking too.

Anonymous said...

Hi La papilion,

Please clear my doubt, as i have 500 shares of DBS Right.
Today i went to ATM to subcribe it and i also applied for another 500 Excess Right.
I noticed that the deducted money from my account was only $5422.
That was pretty cheap as i thought i suppose to pay as below :
1/2 lot of Right => $5420/2 = $2710
and
1/2 lot of Share price at Market value, which is about $8150/2.

la papillion said...

Please clear my doubt, as i have 500 shares of DBS Right.Today i went to ATM to subcribe it and i also applied for another 500 Excess Right.I noticed that the deducted money from my account was only $5422.That was pretty cheap as i thought i suppose to pay as below :
1/2 lot of Right => $5420/2 = $2710
and
1/2 lot of Share price at Market value, which is about $8150/2.


ANS: It seems from your description that you didn't buy from the open market, meaning from the counter DBS R or DBS R500, am I right? You mentioned '1/2 lot of share price at market value' - but if you didn't buy from those 2 counters that I mentioned, what's the market value have to do with the rights share? I'm not sure how you get the 8150 too. Do explain.

If you are entitled to 500 rights shares, and you applied for another 500 of excess rights, then you'll have 1000 shares of rights to pay. Each cost 5.42, hence, 1000 x 5.42 = $5420, which is the amt that is deducted.

If in doubt, do read the OIS, esp the E section. It'll have all the different scenarios that investors may face. I didn't read it, since I'm not the shareholder, nor am I holding any rights shares.

Anonymous said...

Will I get a copy of OIS if I bought a lot of DBR R shares from the open market?

la papillion said...

Hi anon 10:59:00 PM,

It's lodged electronically in sgx announcement site for DBS. I fact, if you read my earlier comments, I've also posted the link somewhere too.

But to answer your questions, no, you won't get a copy. It had been sent out to shareholders already.

Anonymous said...

Hi la papilion,

Just wanted to know that what is the chances for one to successfully subscribe the 1/2 lot of excess right?

la papillion said...

Just wanted to know that what is the chances for one to successfully subscribe the 1/2 lot of excess right?

ANS: It depends on a myriad of factors, like whether you have odd lots, no. of pple not accepting the rights etc...I really don't know. But when I did applied for my excess rights for Pac Andes, I got it. Not like it means anything for this DBS rights exercise though. Just trying to tell you that there's a chance, but it's unknown.

toiletsiao said...

Hi La Papillion,

Nice work here... However I would like to point out an error in your blog post about the Theoretical Price of the DBS shares when the rights are trading as shares on 2nd Feb 2009.

Actually The price now is already recalculated as the diluted price already upon XR on 29th Dec.

Theres no need to apply the formula on the current share price again when then rights become shares on 2th Feb

la papillion said...

Hi Toiletsiao,

Thks for pointing out my mistakes. Someone already pointed out much earlier (in one of these comments and I acknowledged it already). You're right, the share price is already adjusted upon XR.

My mistake, so sorry about that!

toiletsiao said...

Oh..opps sorri..I guess i missed out on that comment =)

Anonymous said...

When do i know that my application for excess right result?

la papillion said...

You'll know it latest by 30th, I think. That's the expected date of issuance of rights shares. A faster way is to check your bank account to see if there's a refund of the monies that you used to apply for the excess rights. No refund means the excess rights are yours.

george said...

HI,

Your blog indeed provide a lot of information. Thanks for the effect. I like to know, I recently get some rights from the open market. After the nil paid trading, I made the payment for the rights. After the expected last date for application and payment of the warrant, I check my CDP account and found the rights no longer reflect in the account. Is this normal? or should the rights reflect in the account till it convert to mother share. Hope to hear from you soon. Thanks

la papillion said...

Hi George,

You're getting right warrant or right shares? For rights shares, it'll be converted to the ordinary shares after nil pay trading period is over. For right warrants, it'll be converted to company warrant after nil pay trading period is over.

In summary, you'll see some counter (either shares or warrants) in exchange for the rights (which is temporary).

Hope I answered your question.

George said...

HI,

What i got was the right warrant. Currently I dont' see any other counter/warrant in my CDP account. Is that normal or have to wait till they issue the warrant certificates then will reflect in the account. Thanks

la papillion said...

George,

May I know which counter that you have that have this? Perhaps I can check out the OIS for you from sgx announcement. If you're uncomfortable, perhaps you can read the OIS yourself and read the important dates listed in there. There should be a timeline for events to happen. Check the dates when the warrants are trading on the open market. OR maybe you just have to wait for it to come.

From what I remembered (had this encounter with yongnam warrants before), there should be a separate warrant counter in the CDP account.