Question: Would you kindly help me with the NAB renounceable entitlement shares please. I hold just under 500 shares. Should I participate in this offer?
Answer (By Paul Rickard): NAB is conducting a two for 25 rights issue at a price of $28.50 per new share. So, for your 500 NAB shares, you will get 40 rights that allow you to buy new NAB shares at $28.50.
You have three choices:
- Take up the rights – you will pay $28.50 for the new shares or a total of $1,140. You must do this (and pay for the shares) by Monday 1 June;
- Sell the rights on the market – ASX code NABR. Currently, around $4.90 (the price will be very close to the current NAB share price minus $28.50). Rights trading ceases next Monday 25 May;
- Do nothing – in which case, your rights will effectively be auctioned to the institutions – and you should receive a cheque back.
The options you should probably consider are one or three. While you could consider option two, brokerage costs may eat into the proceeds (gross proceeds before brokerage will be around $196). The downside with option three is that you have no control over the timing or any expenses charged.
So, if you have the cash and want to invest more in NAB, take option one.
If you don’t have the cash, or don’t want to increase your exposure to NAB and banks in general, do nothing and wait till NAB sends you a cheque. If you want certainty around the price and brokerage costs are small, then sell your rights on the ASX.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
