What Do Additional Entitlements Mean for Small Investors?

Please clarify what the purchase of additional entitlements @$1.42 or thereabouts would mean for a small investor.

We hold 1000 TCL and based on 3:37 would have 81.06 shares available via the rights issue (rounded up I think to 82).

If current pricing of $12.99 is fully priced then $11.40 plus $1.42 seems like a reasonable purchase allowing for transaction fees with a .17 margin.

Understanding that prices could change, why would we not buy, say 1000, TCLRA if we were intending to increase our holding, instead of buying TCL on market.

I am assuming that TCLRA are a 1:1 ratio rather than 3:37 ?

Thanks for all your commentary and insight.

 

A: That strategy might make sense in some situations.

One point to note is that new TCL shares will not participate in the next distribution of 28c (to be paid in mid Feb).

All things being equal (there are some transaction/interest costs), then TCLRA = (TCL – $0.28 – $11.40)

regards


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