The Singapore Airlines (SIA) (SGX:C6L) rights issue is a complicated one and I bet most shareholders don’t know what is going on.
I always believe that financial products are not shampoos and education is the only way to bridge the knowledge gap.
I took the liberty to record a walkthrough of the rights issue document and highlight the salient points for SIA shareholders to take note of.
If you are not a video person, you can read the following main points accompanied with some explanations.
SIA is offering 2 different rights issues to raise money.
- Rights shares
- Rights Mandatory Convertible Bonds (MCBs)
Rights Shares
Rights Shares Issue: SIA is issuing more shares to raise money. Only shareholders will receive the rights to buy more shares. The cutoff date for the shareholder list is on 5 May 2020, 5pm. Thereafter, you won’t be able to receive the rights shares even if you buy SIA shares. For every 2 shares you have, you will get 3 rights shares. You don’t need to pay for the rights. They would be automatically deposited into your CDP or custodian accounts.
Renounceable rights: The rights shares are tradable on SGX. You can buy and sell them like a normal stock. If you don’t want to exercise the rights, you should sell them off. If you want to buy more shares you can also buy more rights and exercise them later. The rights shares will start trading from 13 May 2020, 9am till 21 May 2020, 5pm. The name of the rights shares will be “SIA R” with the symbol “LRDR”.
Issue Price at $3: This means that you need to pay $3 per rights share in order to convert the rights into shares. The exercise deadline is on 28 May 2020, 5pm. If you hold the shares in a custodian account, your broker may set a deadline earlier than 28 May. So take note of the timing. You have to pay for the rights via ATM if you hold the rights in CDP and transfer the money to your brokerage account if the rights are held under custody.
Theoretical Ex-rights Price (TERP) of S$4.40: SIA share price was around $6+ before the rights shares issue. As the new shares are issued at S$3, you can expect SIA share price to trade lower to around S$4.40 after the rights are issued. But the market may not trade according to this theoretical price.
Rights MCBs
Rights MCBs Issue: Besides the rights shares issue, SIA is also issuing rights MCBs to raise more cash. I suspect the reason for issuing MCBs is because there would be too much dilution if it is a pure rights shares issue and SIA share price will have to trade much lower. Thus to be clear, these are bonds and not shares.
Only shareholders will receive the rights to buy these bonds. The cutoff date for the shareholder list is on 5 May 2020, 5pm. Thereafter, you won’t be able to receive the rights MCBs even if you buy SIA shares. You will receive 295 rights MCBs for every 100 SIA shares you own. You don’t need to pay for the rights. They would be automatically deposited into your CDP or custodian accounts.
Renounceable rights: The rights MCBs are tradable on SGX. You can buy and sell like them like a normal stock. If you don’t want to exercise the rights, you should sell them off. If you want to buy more bonds you can also buy more rights and exercise them later. The rights MCBs will start trading from 13 May 2020, 9am till 21 May 2020, 5pm. The name of the rights MCBs will be “SIA MCB R” with the symbol “GANR”.
Issue Price at $1: This means that you need to pay $1 per rights MCB in order to convert the rights into bonds. The exercise deadline is on 28 May 2020, 5pm. If you hold the shares in a custodian account, your broker may set a deadline earlier than 28 May. So take note of the timing. You have to pay for the rights via ATM if you hold the rights in CDP and transfer the money to your brokerage account if the rights are held under custody.
Zero-coupon: The MCBs are zero-coupon bonds which means you will not receive interest payments. Instead, you will receive a maturity amount that is higher than the principal you have put in. The maturity amount is equivalent to S$1,806.11 based on $1,000 principal. Or every $1 you put in, you get $1.81 at the end of 10 years.
Mandatory Conversion: As the name emphasised mandatory conversion, this means that the bonds will be converted to SIA shares upon maturity. There will be no cash paid to you.
Callable: The MCBs are also redeemable by SIA before maturity. They can have the option to redeem once every 6 months. Your yield will range between 4% and 6% depending on the year of redemption. The closer to the maturity, the higher the yield.
SIA Rights Issues FAQ
Q: How soon will I see the rights in my CDP / custodian account?
Not sure. But definitely before 13 May 2020 because the rights will start trading.
Q: What prices should the rights shares and rights MCBs trade at?
Price of the Rights Shares should trade close to SIA share price – $3.
Price of the Rights MCBs should trade close to $0.
Q: I will have odd lots of Rights Shares and Rights MCBs, how do I sell them?
There are two more counters, SIA R1 (symbol:HTFR) and SIA MCB R1 (symbol:8YJR), where you can sell your odd lots. Ask your broker if you can amalgamate the orders for the R and R1 so that you only pay commission once.
Q: If my SIA shares are held under CPFIS, must I buy the Rights & MCBs using my CPF fund? If I decided to sell the Rights, will the proceeds go back to CPF or cash?
Yes, you can use CPF to fund the rights purchase, provided your CPF limit allows.
If you sell the rights, the monies will go back to your CPF.
Q: I have SIA shares which I have bought using cash, would I be able to exercise them with CPFIS instead of cash?
No. You have to use cash.
Q: I have SIA shares in my SRS account, what do I need to do?
Your agent bank which holds your shares in custody should inform you about your rights shares and MCBs. You have to follow their instructions to exercise them. Otherwise, you should sell the rights.
Q: How are our shares diluted if we don’t subscribe to the rights shares?
Your % ownership of SIA will reduce. Assuming you have 1m shares. And you didn’t buy more but the number of shares will increase anyway. So your % stake can drop from 0.08% to 0.03%.
Q: If i do not own any SIA share can i buy the rights shares?And how do these rights shares work after I buy them?
Yes, you can buy the rights shares even if you do not have SIA shares. After you buy the rights shares, you still have to pay to convert the rights to shares. Don’t buy if you have no intention to exercise the rights, because the rights will expire.
Q: Do we need to pay $4.84 for a MCB in order to convert it to a SIA share in 10 years’ time?
No need to pay. They will just give you the shares in exchange for the bonds.
Conclusion
We hope that we have simplified these rights issues to you. You have to understand this and decide what to do if you are a shareholder. Either sell the rights or exercise them. Don’t let the rights expire worthless!
Hi Alvin
I have bought my 1000 SIA share before ex-date and entitled to the 1500 rights, however I have misplaced the letter SIA has sent to me 2 weeks ago.
MY questions is:
1) Am I still able to sell my rights without filling up the forms sent by SIA (which i have misplaced)
2) I have a regular Remisier whom i bought my SIA shares with him. Can I get him to sell the SIA rights on my behalf. (my regular transactions was done with him and all the shares transactions has been through CGS trading account and DBS bank GIRO ) . During my past share transaction I basically just text him to buy and sell without any hassle of filling up forms. Can I do the same with the selling of SIA rights ?
3) If I wish to sell my 1500 Rights, do i need to pay the $3 per Right share issued in advance before I can do the selling?
4) Prior to Question 3, if I will to sell the SIA 1500 rights, I will have to get it done before 21 May’20, am I correct?
5) If I wish to keep as investment, therefore I will need to exercise and convert the rights to shares at $3 per share? Can I get the Remisier to do the transaction without my SIA form submission?
thank you and have a great weekend!
Renie
1) The offer letter should be red in colour which has not been sent out yet.
2) Yes.
3) No.
4) Yes
5) Possible if your rights are in custodian account. CDP might not be possible. Check with your remisier
Hi Alvin,
Under questions 1 and 5, Renie talks about a form he has to submit. What form is that?
Thank you,
Peter
you dont need to submit a form. you will receive a letter from CDP / broker. just pay for the rights if you want to exercise them
Thanks!
1)Will the letter from CDP be electronic or in paper form?
2)How come as of today, I have not received any form?
1) Paper
2) Ask CDP
Hi Alvin,
Thanks for the very informative video.
You mentioned that the Rights can start trading from 13 – 21 May.
1) How about the exercising of the Rights ? Is it between 13 – 28 May, or 22 – 28 May ?
2) For those Rights held in CDP, is the only way to exercise via ATM (DBS, OCBC) ?
Thank you.
1) 13-28 May
2) Yes.
Hi Sir,
I noted my SIA bought using CPF is held under OCBC and not my CDP account. How do i exercise my right then?
Many Thanks.
Confused Tan
Your agent bank would send you the letter and instructions
Thanks for the informative piece on Sia’s corporate actions.
Given the structure of the MCB (zero coupon, callable, long term), is it safe to say it will be traded at a (possibly deep) discount upon opening?
Appreciate your thoughts.
It was trading at a wide range on the first day: 0.001 to 0.019 or 1900% price spread! Shows that it was hard to value it and market participants had different views.
i had 3 lots of SIA shares,so means that i will have 8850 of MCBs.how much do i need to pay if i want to exercise my 8850 of MCB rights?
if MCB rights trade at $0,means its better i don’t exercise the rights as i still need to pay transaction fees if i sell the MCB rights at $0 right?
MCBs are exercised at $1 each.
You need to pay transaction fees to sell the MCB rights.
Hi just to clarify on the rights trading. If i wish to purchase the rights @ $3, would that mean i still have to pay $3 to convert the rights to SIA shares?
Wouldn’t that make no sense since its trading @ $4.40 as per current price?
the SIA share price has already adjusted for the dilution, dropping from $6 to $4.40.
The rights has value. If SIA is trading at $4.40. They rights would be trading around $1.40. If you exercise it at $3, it actually cost you $4.40 because there was an opportunity cost of $1.40.
Hi Alvin;
Thanks for an excellent write up.
You wrote earlier “The cutoff date for the shareholder list is on 5 May 2020, 5pm.”
Is this based on the transaction date or the settlement date? i.e. if a person executed a trade at 11am on 5th May, but the settlement date is 8th may, will he still get the rights stocks?
Thanks.
transaction date
Hi Alvin, my SIA rights is under CDP, and i m not in SG now, hence no access to my SG ATM. In this case how do i subscribe to the rights?
Thanks
You can try this https://www.singaporeair.com/rights/intro
Else, you might have to contact CDP.
Hi Alvin, for educational purpose, what is the difference between cum-rights vs ex-rights and how they affect us as investors?
Does it mean that for cum-rights, investors do not have to fork out a cent? Whereas for ex-rights, investors will have to top-up?
you buy SIA shares during cum-rights = you get the rights
you buy SIA shares during ex-rights = you don’t get the rights
Hi Alvin,
I have SIA shares bought through my CIMB broker using cash and CPF on different occasions. I can see those shares separately in my SGX and CPF accounts. I assume that the Rights shares and Rights MCBs will be credited according to my total number of shares and according to your replies to different readers. I expect in my SGX account, the Rights shares and Rights MCB that I entitled via cash purchase will be added to my account by or before May 13 but for those in my CPF account, do you think they will be credited to my CPF account accordingly.
If I want to sell or exercise the Rights share and Rights MCBs, do I need to do it separately for those obtained through cash purchased SIA shares and those through CPF?
Thanks for your help.
Yes. separately. CPF can only use CPF monies to fund the rights exercise.
Hi Alvin, thanks for your informative video.
I am currently using standard chartered custodian account and own some SIA shares. Up to now i have yet to receive the rights shares. May i know if the rights shares will appear in my trading platform or do I need to look for the counter to purchase the rights?
Thanks in advance
They should appear on your trading account but best check with Stand Chart because I don’t represent them.
You should receive a letter from them too.
Hi Alvin, thank you for your prompt reply.
The rights shares have already appeared on my trading account but i do not seem to be able to convert it to SIA shares at $3. Im using a custody account without brokerage, do I need to exercise it via ATM or via online? I did not receive any letter/ instructions from Standard Chartered.
Thanks again for your kind assistance.
If your shares are held in stand chart you have to follow their instructions and to do the necessary payment via bank transfer. Not done at ATM. Have to wait for their letter.
Okay. Will wait for another few more days. Thanks Alvin.
Hi Alvin,
My SIA shares are held in a Custodian account via a broker. The broker says I won’t see my rights appear in my Custodian account until probably next week and only after it sends me an email confirming how many rights I own and asking me to confirm how many of my rights I wish to exercise. But how can I start trading my rights if they don’t appear in my account when trading begins on May 13th?
Thank you for your advice.
I don’t represent your broker. You have to ask them since you pay them custodian fees and commissions.
Hi Alvin,
To clarify –
1) The rights should appear in my CDP account before 13 May? How do I see them in my account?
2) You mentioned that the option form to buy the shares/MCB has not been sent out by SIA? When would they be sent out?
Many thanks.
1) You can check online if you have CDP online access.
2) I don’t represent SIA so I won’t be able to answer for them.
I bought 2000 shares using SRS account. So i need to use back SRS to buy the right shares?
I just need to access an DBS ATM and my rightful right shares will be reflected there?
Yes. very likely you have to use SRS. you can confirm with your broker.
SRS subscription not via ATM. Via your agent bank.
Dear Alvin,
Estimated Rights selling price is estimated closed to $3 from 13-21May,
1)So we should instead exercise it with $3 per shares 1st, thereafter sell it immediately in mainboard @ estimated price of $4.40?
Dont mistake rights exercise price vs rights trading price. They are different. The rights should trade around SIA share price minus $3. If SIA share price is $4.40, the rights shares should trade around $1.40.
So meaning that we can sell our right without any capital outlay and reap 1.40 1st. Or alternatively exercise with $3 and can sell at higher price if we can hold for several years & trading price went up.
yes.
Hi Alvin,
Renounceable rights: The rights shares are tradable on SGX. You can buy and sell them like a normal stock. If you want to buy more shares you can also buy more rights and exercise them later.
Price of the Rights Shares will be close to SIA share price – $3.
Issue Price at $3: You need to pay $3 per rights share in order to convert the rights into shares.
So if I buy more rights at $3 per rights share and pay $3 to convert them to shares, I will end up paying a total of $6 per share?
Dont mistake rights exercise price vs rights trading price. They are different. The rights should trade around SIA share price minus $3. If SIA share price is $4.40, the rights shares should trade around $1.40.
Oh, didn’t realised that’s a minus sign, I thought that’s a dash. Now I understand, thanks Alvin!
Hi Alvin,
Excellent videos and write ups .
I’m following SIA prices since right issue announcements, ex right price still hovering around 4.41 ,
What will be the impact on SIA mother share price when trading of rights starts from 13-21 May ?
The price should have stabilised and not change much when the rights start trading
Dear Alvin,
What will be the impact of SIA mother share price after all rights plus MCB have been exercised (i.e. after 28 May or 9 June?) ?
The share price has already adjusted for the rights. So it is unlikely going to have huge movements, barring any other factors that may drive SIA share price.
Hi Alvin,
Thanks for prompt reply.
SIA today closed at $4.29
I do not own any SIA shares, so I’m thinking of buying some shares tomorrow.
1) tomorrow right price will start trading from $1.29 ? Can right price go lower or higher ?
2) can I just directly buy the mother share ? So this saves me the trouble of paying $3 to subscribe and wait for conversion to common shares
3) Any difference in price ?
Looking forward for your advice .
Thank you
1) yes. market forces
2) yes
3) should be the same as the obvious arbitrage would be traded away by market participants.
Morning Alvin
What is SIA R ?
What is SIA R1 ?
Which one is for rights trading ?
Both are. R1 is for odd lots (less than 100 shares)
Hi Alvin,
I am holding 2500 SIA shares (ave price S$9.80) using CPF.
Currently my CPF limit is almost over. I cannot buy Rights / MCB using CPF.
Since my average price is very high, I need to buy these rights to reduce my average price. Since my CPF limit is over, I am thinking to buy 3750 rights using cash / SRS.
What will be right price if I want to buy in the open market?
Secondly, in my current position, what will be the best option to buying Rights or MCB?
My current situation I can able to buy either one only. Please suggest and I am looking to keep for long as long as match my average price.
Thanks
you can consider buying the SIA shares directly. subscribing rights and converting them later would also have similar effect. The rights should be trading around SIA share price minus $3. So either way are fine.
Alvin,
Thanks for the quick reply.
Meaning, Right price shall be around (current SIA price S$4.4 – 3.0 )
S$ 1.40.
If I want sell my rights (3750×1.4 = S$5250) will be credited to my CPF.
Hope my understanding is correct.
yes
Hello Alvin,
I have SIA shares and eligible to get Right Shares in CDP. If you could help, do you know where to see right shares inside my CDP online? I don’t know where to look for and I only see my portfolio.
Regards,
Linn
You can login to CDP online if you have online access. Otherwise wait for the letter from CDP. And they may not have credited the rights into your account yet.
Hi Alvin, I have 2500 SIA shares and eligible for the rights but they are purchased and held under FSM.
1) Is it correct to say that the rights will be inside the custodian account with FSM?
2) The rights share price will be market price minus $3 if I opt to sell the rights share?
3) If the rights MCB price is near $0, then it means I will lost money selling the rights MCB due to the transaction price, correct?
4) If I want to buy more rights MCB, how will it be traded when the cost is $0?
Regards,
CK
1) Yes
2) the rights will reflect its own price once they start trading.
3) possible
4) wont be $0. maybe 0.05 or 0.10. not sure how it will trade. but definitely not a high value.
Hi Alvin
Thanks for your prompt responses on others’ doubts and queries. Would like to clarify on the below:
Assumption : SIA trading price: $4.40
1) Rights can be either sold or exercise during 13th May to 21 May. Last settlement date is 28 May(Payment).
i)If you prefer to sell your rights , you are selling it at ($4.40-$3[exercise price])= $1.40 per rights
ii) if you are converting to rights, you will pay $3 dollar per rights.
Conclusion: Either way you only earn the difference between trading price and exercise price.
2)Shares purchased before 5 May are entitled to rights, you can sell off your existing shares on 6 May onward while still able to exercise your rights based on the shares quantity before 6 May.
3) If you don’t own any ‘cum-rights’, you can still purchase rights at $1.40 and exercise it at $3 . In other words, you are actually trading at the market rate($4.40).(May require your explanation , why would people purchase the rights when they are trading at market rate.
4) Shareholders who exercise their rights at $3 to convert into shares can only start trading at 8 Jun based on EGM indication date.
5) Till now i have not receive any rights in my CDP account or notification letter on the rights, thus for those who have yet to receive theirs. You are not alone.
Thank You
1i) yes
1ii) yes
2) yes
3) yes. there can be many reasons why one would go for the rights than the SIA shares. for one, the commission would be cheaper since the contract value is lower ($1.40 x rights vs $4.40 x shares).
Hi Alvin,
Thank you for the good write up that is simple enough to understand. I truly appreciate it!
I have some questions regarding about the rights and MCBs.
1. I had approximately 500 shares of SIA before the drop of $6 to $4+. And was given some rights and MCBs. Does that mean my original shares with SIA will be affected after receiving the rights and MCBs?
2. I do not have any broker and purchased SIA shares directly from DBS Vickers into CDP account. If I do not wish to execute the rights and MCBs, can I still sell it from DBS Vickers?
3. Without a broker, how am I supposed to execute the rights and MCBs? Wait for the letter and pay through the ATM?
4. Lastly, if I do not do anything about it. I would be at a loss right?
1) No. the share price has already factored in the rights.
2) Yes.
3) Yes. CDP will send the letter.
4) Yes. pls either sell the rights or exercise them. Not doing anything is the worst thing you could do.
Hi Alvin
I bought the sia shares via Vickers on 5 May but they only got reflected in my cdp account on 8 may. Am I still eligible for the rights? Many thanks
Yes. Based on transaction dates.
Hi Alvin,
Learnt a lot from your article.
How exactly do we exercise our rights to Shares and MCB?
Do we simply make payment to our trading platform for the number of rights we wish to convert to shares x$3?
Wait for the letter from CDP / Broker. Follow their instructions to exercise the rights.
I purchased SIA stocks in April via FSM, what does this mean to me? Am I entitled to the Rights as well?
Yes
Hi Alvin,
Really informative video.
So if the SIA R & SIA MCB R (PL) had already appeared on my CDP portfolio, i just need to wait till 13th May before i exercise my rights via the ATM? Can i use the DBS Vicker’s cash upfront to exercise my rights instead? Sorry for the silly question.
Regards,
Isaac
No. Have to use ATM because your shares are held in CDP.
Hi Alvin, I am very new into trading and the first stock that i purchased with CPF was SIA at $6.05 (few weeks back). I would like to check if i renounce my rights, do i have to sell/trade the stocks off the market immediately or am i able to hold on without any rights/MCBs. I have read a few reviews that none seems to address this, most were explaining the potential costs and the returns. Thank you for your reply.
You can hold the stocks (SIA Shares) and sell the rights for cash.
Hi Alvin, I am using IOCBC with CPF to purchase. Where and how can i sell the rights? Sorry if this is a stupid question.
Sell like how you would sell a stock in your CPF. Make sure you indicate it is a sale from cpf to your broker
Hi, thank you very much for this article explaining the issue for retail investors like me holding SIA stocks. The rights shares are tradable on SGX from 13th May, and is expected to trade at the price of the normal stock less $3 since we need to pay $3 to covert them into normal shares. My question is whether these rights will have its own market pricing during trading OR is the price always peg to the price of the normal stock (less $3)? In order words, can we expect a divergent of the prices between the rights and the actual stock price? TIA
The rights prices will be affected by market forces and yes, the prices can diverge and not necessary be trading at SIA share price minus $3.
Alvin,
1) I have 1000 SIA shares
2) What is my quantity of:-
a) Rights shares
b) Rights Mandatory Convertible Bonds (MCBs)
3) If I sell both how much will I get?
4) Can I sell both together?
Thanks
rights = 1000/2*3
rights MCB = 1000/100*295
Best to check your CDP account or custodian account
Selling price dependent on the trading prices of the rights.
Hi Alvin,
Thanks for the information.
Now, my SIA Rights and MCB have appeared on my CDP account..
My question is
1. How should I pay CDP using ATM to exercise both as I don’t have the contract reference number (as per normal share buying).. ?
2. How should I sell my MCB odd lot? On my CDP it is only reflected GANR code, there is no 8YJR?
Thanks
Thanks
1. You should receive a letter soon.
2. You can sell the odd lots via 8YJR even if it is not reflected in your CDP.
Silly question – if i wish to exercise to subscribe – how do I know how ouch to atm-pay? Am I supposed to calculate it myself?
Thanks!
I think it is automatically calculated. You just key in the number of shares / MCBs you want to subscribe at the ATM. They should have instructions in the letter you are about to receive.
Hi Alvin thanks for breaking this down for us, very helpful. I am hoping you can help me with these 2 qns
1) Assuming I have 1000 shares which I bought at $6.24 and I decide to exercise the share rights, the cost or average share price would be averaged down to $4.30?
2) After exercising and once I own the shares (8 June I think?), is there a minimum holding period before I can sell my shares?
1) Yes. [1000*6.24+(1000/2*3)*3]/[1000+(1000/2*3)] = 4.296.
2) No.
Hi again, please correct me if I’m wrong with this example where I’ve own 666 shares before 5th May:
1) I’ll then be given 1000 rights (3 for 2) which I need to pay $3 each to exercise, meaning it’ll cost me a total of $3000. Does that mean I’ll be getting 1000 SIA (C6L) share on the payment date added to my portfolio?
2) If above is correct, so I can sell these 1000 shares in the open market, and if the C6L stock is trading at $4.40 by the time I get/trade them, the proceeds will be $4400 to me and the profit will be $1400 ($4400 – $3000)?
3) Of course, for the 666 shares which I originally own before 5th May would have cost me say $6.50 to own and was diluted/dropped to say $4.40, that would also mean I’ve lost $1,398.60 (666 x $2.10). Meaning at the end of it, I would have gained nothing even with the so-called $1,400 profit in (2)?
4) However, this also mean that IF I do have have that $3000 to exercise the rights or chose not to do anything (and let the rights lapse), I would have surely lost the $1,398.60 out right due to the market price drop. So we’ve no choice but to spend that $3000 so as to at least “break-even” – right?
Thanks!
1) yes
2) yes
3) yes
4) yes and no. You can sell the rights and get back some cash. For eg if the rights shares trades at $1.29, you can sell 1000 rights at 1.29 and get back 1290 in cash.
Follow up to your reply to Point 4 above:
1) Does this mean that if I chose the default (take no actions) option, then both of these Rights and MCB will expire on 28th May exercise deadline AND I will get nothing? Or will they be “liquidated” at the last market price and get back the cash automatically?
2) If the above answer is “get nothing back”, then it also means my best play is to either sell them off during this period 13th May to 25th May, OR to exercise them and pay the $3/$1 respectively to own the shares/bonds.
I think the above is critical decisions to be made since majority of the retail investors may not even read these letters or know what’s happening, taking the default and let them lapse….
1) It will be worthless if you don’t exercise them. Temasek will exercise the rights you have given up and the shares will belong to them.
2) Yes
Thanks. I feel that this “sell them or it’ll be worthless in 13 days period” is really understated. Learnt something important this time – will be sure to read all corporate’s notices carefully next time and not assumed they are all just voting for AGM.
Last question from me: Now that I can see the rights in my account, can I still sell my original C6L shares away while still hold the “rights” to exercise them or trade them during this 13 days period? In other words, do I still need to hold on to the original shares before I can exercise the rights?
No need to hold the parent shares C6L. Selling them would not affect your rights.
Hi, you mentioned that TERP is about $4.40. Current SIA price is $4.29, would be better to buy from the market straight instead of exercising the MCBs?
I would assume we definitely should exercise the rights share since we pay $3 to get $4.29 back.
As the SIA share price trade lower, the rights would also trade lower. So buying mother share or the rights to exercise later should have minimal difference.
Hey Alvin,
Super informative post and video, as always! Love how you make it simple for everyone.
I bought my SIA shares in April via DBS Vickers, and the new rights appears in my CDP account. I am planning to exercise my rights. However so far, no letter at all in the mail with instructions on how to do so. No news from DBS Vickers at all either.
Would you know when the letters would be sent? Wonder why they don’t do this all digitally, especially with the CB in place right now. In case I don’t get a letter, any instructions on how to exercise the rights?
Thanks!
You should get the letter soon. Else you can try this https://www.singaporeair.com/en_UK/sg/about-us/information-for-investors/rights-issue/
Hi Alvin,
Just wanted to thank you for the details and very clear explanation. Also patiently answering everyones questions in the forum.
Really appreciate it !
OMG.. SIA R is trading at $1+ so cheap..
Hi Alvin, I would like to know if i were to load it up at $1+, after i got the rights do I still did to top up $3 to convert it to SIA shares?
Yes.
Hi Alvin,
1)I will need to top up the $3 before 28th May to exercise and convert it into shares?
2)At the same time, what will happen to those rights if i don’t exercise them by 28th May.
3)The top up amount will need to settle through my broker?
1) yes
2) you get nothing. Temasek will exercise the rights that you have given up.
3) if your shares are custodised with your broker
Hi Alvin,
I don’t intend to keep the MCB right, how can I sell it to open market?
They are trading now. You can sell them like how you sell stocks normally.
Hi Alvin,
Appreciate your summary. It is really helpful.
I am new to trading and i have a question regarding average cost per share.
During this period til 21st May, are we able to sell our entitled rights on the secondary market and rebuy the rights back at $3/rights and exercise it to own the shares?
If so,
Scenario:
Before 5th May, transacted 1000 shares at $6.00. On 13th May, received 1500 rights in CDP and sell the rights at current value of $1590. Then, repurchase 1000 rights and exercise to shares at $3/rights.
6000-1590+3000= $7410 (2000 shares owned)
Average cost per share now = $3.705
Will this method be better to reduce the average cost per share, rather than exercising the entitled shares of 1500 first?
Thank you.
You can sell 500 rights and exercise the 1000 rights. You dont need to sell all and rebuy some.
Hi Alvin,
Thank you for your response.
I did not take into account that when i repurchase the rights, i will have to buy back the rights are its current market price and with an additional of $3 to exercise to shares.
Before, I thought those entitled, will exercise the rights at $3 per rights, regardless the amount of excess rights bought.
Hi Alvin,
Like to clarify on your sharing:
“Rights Shares Issue: SIA is issuing more shares to raise money. Only shareholders will receive the rights to buy more shares. The cutoff date for the shareholder list is on 5 May 2020, 5pm. Thereafter, you won’t be able to receive the rights shares even if you buy SIA shares. For every 2 shares you have, you will get 3 rights shares. You don’t need to pay for the rights. They would be automatically deposited into your CDP or custodian accounts.”
–> “For every 2 shares you have, you will get 3 rights shares. You don’t need to pay for the rights. They would be automatically deposited into your CDP or custodian accounts.”
May I know what do you mean by “don’t need to pay for the rights as they’d be automatically deposited into your CDP”.
My understanding is that the rights are open to existing shareholders and they need to pay (base on SIA’s website: https://www.singaporeair.com/rights/intro). Appreciate your reply, thanks.
Rights are given to the share holders. But you need to pay to exercise the rights.
Hi Alvin,
Must pay thru the rights via ATM? can pay via iBanking?
You can try this: https://www.singaporeair.com/rights/intro
Hi Alvin,
Thank you for the details and clear explanation.
If I were to exercise my given SIA Rights (3000), paying SGD$9000 before 28th May 2020, will these Rights shares be combined with the amount of Shares (2000) SIA Mother Share counter on 8th June 2020? Or the Rights share will be traded on a separate counter on SGX?
Thank you
they will convert to SIA shares and merge together with your existing shares.
Hi,
I have a few questions regarding the rights and MCB.
1) If i am previously not the shareholder before 5th may, i am unable to buy the rights or bonds at all?
2) As mentioned by SIA, $3 per rights, and if i owned 100 shares before 5th may and entitled to total of 150 rights, how much does it cost to exercise to shares? $450?
3) If i do not wish to exercise to shares but to sell it, does it mean that i will sell it for $150 if its going at $1 per rights now?
4) If after entitled with 2950 bonds, Can i exercise 1000 bonds and sell the remaining 1950?
Looking forward to your response. Thank you.
1) You can buy the rights and exercise them.
2) Yes.
3) Yes.
4) Yes.
Hi Alvin,
Thank you for your response.
a) Relating to question 1) does this mean that, I will have to buy the rights at current trade price of $0.6 and exercise them at $3, total of $3.6 per share?
b) What if i am entitled( bought shares before 5 may) and decided to buy excess rights to convert it to shares, do i pay only $3 for each excess rights or pay $3 + current trading price rights?
a) yes
b) $3 + rights shares current trading price
hi Alvin, great article! mass confusion on SIA rights now..
currently have 3000 SIA shares.
– will get 6000 rights ($18k subscription)
– will get 11800 MCB ($11.8k subscription- receive 21,312.10 after 10 years?)
i will most likely take up my rights issue. but still contemplating for the MCB.
what will be the difference if i do or dont take up the MCB?
how will it affect my holding dilution?
the MCB will receive $ 21,312.10 after 10 years?
or is it XX worth of shares after 10 years? (if so, how do i calculate this XX of shares?
8850 MCBs will be worth $16,018.50 in 10 years, but will be paid in shares at $4.84 conversion price.
3000 shares should get 4500 rights shares and 8,850 rights MCBs.
No dilution if you dont take up the MCB now. But it would 10 years later when they convert to shares.
sorry, my mistake. its 4000 SIA shares that i had.
i checked my CDP.
– 6000 rights
– 11800 MCB.
so it would be better to take up the MCB, soley to avoid dilution?
– 11800 MCB ($11.8k subscription- receive $21,312.10 after 10 years)
based on 4.84/share conversion:
– will receive +4403 shares after 10 years at cost of $$11.8K
taking both MCB + rights.
– total shares will be 6000+4403 = 10403
– total cost will be $18k + $11.8 = $29.8
hence $2.86/share
why does it seems to be worthwhile to buy MCB @$1 now, for a future value of 4.84/share in 10 years?
1 MCB is not equivalent to 1 SIA share in 10 years’ time. $1 MCB is worth $1.81 in 10 years or about 37% of the value of a SIA share.
in your opinion, would you take up the MCB?
i won’t even buy airlines in the first place because it is a difficult business!
that is true. but for most of us here. i guess its being caught between a rock and a hard place.
stuck with MCBs, not sure to sell or keep it.
hence the question.
Hi Alvin,
Currently I have both MCB and the rights in my custodian account.
Am I right to say that we can only choose to sell either MCB or rights?
Once either of them is sold, the other option will no longer be valid?
No. they are separate. You dont have MCBs yet. You have MCB rights
Hi Alvin
I am a Malaysian and I saw SIA rights already credited in my CDP Account.
How can I exercise my rights entitlement from Malaysia?
Thanks
You can try online: https://www.singaporeair.com/rights/intro
Dear Alvin,
Thank you so much for the clear explanation.
I am holding onto 1000 SIA via SRS with OCBC. I have verified that I am entitled to 1500 rights and I would like to sell the rights via code name LRDR but the code name is not reflected in my SRS summary details. Therefore, can I still proceed to sell via iocbc or I need to call up ocbc to verify? Thank you in advance.
You should be able to sell. You can also check with OCBC to be sure.
Hi Alvin
I have 2000 shares of SIA. Do I need to subscribe to the SIA MCB rights before I can sell the rights ?
No. You can sell the rights now.
Hi Alvin,
Great summary and extremely helpful article. I have a couple of questions on Mandatory Conversion of MCB:
1. Upon maturity of MCB, the number of shares I will get = The cash value of the MCBs divided by the SIA stock price at the point of conversion?
2. From where will SIA obtain these shares for conversion?
a) SIA buys shares from open market to do the conversion? i.e. no dilution of total quantity of SIA shares.
OR
b) SIA issues new shares to do this conversion. i.e. a dilution of shares, resulting in higher number of shares in the market and drop in stock price?
Regards
1) number of MCBs x $1.81 / conversion price of 4.84 = number of SIA shares you get at 10 year mark.
2b will happen.
But SIA can redeem the shares before maturity and will pay cash. No new shares will be issued if that happens.
Hi Alvin, when does share dilution occur? First day of Ex-Rights (6 May), or Date of rights issuance (5 June), or Both?
Thanks in advance
the share price would already dropped during 6 May. if one doesn’t sell the rights or exercise them, they will be diluted when the rights shares are converted to shares.
Hi Alvin
Currently holding shares under SRS:
1) The OIS comes directly from SIA to Shareholders and not some other entities right ? (even though I haven’t received it)
2) Separately the Agent Bank will send out letters to SRS account holders on instructions for exercising the rights (shares+mcb) ?
Thanks a heap!
1) Yes
2) Yes
Can I ask why would the rights be trading at these prices?
1) Price of the Rights Shares should trade close to SIA share price – $3.
If I pay $3 for a right share, I have to pay another $3 to exercise the right and would total to $6 for a share, for the current price of $4 per share. Wouldn’t make sense as an investor who currently doesn’t own any rights but wants to get a part of the pie…
2) Price of the Rights MCBs should trade close to $0..
Is the demand for Rights MCBs so low?
3) Are the MCBs going to be tradable on SGX too (after being issued)?
1) If SIA share price is $4. The rights shares would trade around $1. $4-$3. But the market has showed that the rights shares are trading slightly cheaper.
2) it is not about demand. because the MCB is worth $1 and maturity at $1.81. It cannot trade at high value else the yield of the MCB is too low. And the yield cannot be lower than AAA rated Singapore Government Bonds.
3) Yes.
Hi Alvin,
If the share price happen to trade below $3, it does not make sense to exercise the rights, right?
yes
Hi Alvin,
I just received a letter from CDP saying that my SIA shares is on loan. i.e. -1200 shares. Can I sell such shares anytime?
Should be able. I suppose this is under the Share lending scheme. https://drwealthcom.wpcomstaging.com/how-to-add-up-to-2-8-to-your-dividend-yield-by-lending-out-your-shares/
The value of the SIA mother share continues to fall and is currently around $3.80.
A couple of questions.
1. Once the rights redemption window closes should the SIA mother share price climb to the sum of the share + rights (currently $0.77) i.e. circa $4.50?
2. Some online commentaries say the mother share may continue to drop to $3.00 as that’s the price existing shareholders have the right to purchase at. How likely is that?
1) May not. The pricing is due to the market sentiment.
2) It is not related to the rights subscription price. The SIA share has already adjusted for the rights when it dropped from 6 to 4ish. 3 rights for every 2 shares = 2 x $6 / 3 = $4.