| The nil-paid rights of property developer Heeton Holdings trade between Oct 2 and Oct 12 (Monday). But there has not been a single right traded since the trading period started. There is no demand because the exercise price of 49.3 cents apiece is higher than the mother share's trading price. The mother shares themselves have been illiquid since Oct 2 but turned more active yesterday (Oct 6), trading at 46.5-47 cents with 177,700 shares changing hands. (By the way, Heeton's NAV as at end-June 2015 stood at $1.15 per share while some investors have estimated its RNAV at more than $1.50.)  The traded prices of the mother shares were still below the exercise price for the rights (and therefore offers no incentive for people to buy the rights or for the 800 or so Heeton shareholders to exercise the rights). What is interesting is that, for shareholders who have been allocated the nil-paid rights, it makes sense to buy the mother shares at 46.5-47 cents (or any price below 49.3 cents) as an alternative to subscribing (at 49.3 cents) for the rights shares. By way of example, if they have been allocated 10,000 nil-paid rights, a shareholder might as well buy 10,000 mother shares and then let the nil-paid rights lapse (instead of exercising them). Certainly, a shareholder could also choose not to buy the mother share nor subscribe for the rights. Then his stake gets diluted -- which would be fine with him if he holds the view that Heeton's prospects are not bright and therefore it's not worthwhile for him to invest more money into the company. This, however, would be contrary to the view and action of the Toh family, which is the controlling shareholder. Individually and through their investment vehicles, they have undertaken to subscribe for all their entitlement of rights shares. They will be putting down about $27 million on the table.  They are Hong Heng Company Private Limited, Heeton Investments Pte Ltd, Toh Khai Cheng, Toh Giap Eng and Toh Gap Seng. They have a direct interest in 167,328,730 Heeton shares, representing 62.30% of the existing issued and paid-up share capital (excluding treasury shares) of the Company. As for the use of the net proceeds of the rights issue (which is, by the way, non-underwritten), Heeton said they will be deployed as follows: (a) approximately 90% for the repayment of borrowings; and (b) approximately 10% for financing investments and acquisitions and general working capital. |
Details of the rights issue can be found in the company announcement here.
Comments
Yes, you are right. The current price is already ex-rights. I was misinformed regarding the ex-rights date and got it mixed up with the ex-rights trading date. Thanks for the correction and clarification. Regards.
Thus after rights trading ceases on Oct 12, which is just 3 trading days away, there will not be another leg-down for the mother price to 35.5 cents. Note that the share price went up 1 cent today to 48 cents and the trading range was 47-48 cents.