OCBC announced the Rights Issue to partially finance the acquisition of Wing Hang Bank. It will issue 440,047,710 new shares to raise net proceeds of about $3.3 billion. The existing shareholders of OCBC (and buyers of OCBC shares during cum-all trading period) are entitled to subscribe to these rights issue at $7.65 per share. This price is at 25% discount over the last price of OCBC traded on 15 August at $10.20. For every 8 OCBC shares held, shareholder can subscribe to 1 Rights Share.
Let’s take an example through this.
Number of OCBC shares owned = 1,000
Rights Share = 1/8 of 1,000 = 125 shares
Cost to shareholders:
OCBC shares at $10.20 = $10,200 (excl transaction costs)
Rights Share at $7.65 = 125 x $7.65 = 956.25 (excl transaction costs)
Cost per share = ($10,200 + $956.25) / (1000 + 125)
Theoretically, per unit share price after a rights issue should come down. In the above example, OCBC share price should drop to $9.92 from $10.20 (minus 28 cents) after the rights issue. This is a theoretical share price, the actual share price traded would be different due to factors other than rights issue.
Some shareholders may have bought OCBC at a different price from $10.20. They can work out their per unit cost after rights issue using the above method.
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