Share-holders not intending to subscribe a listed company’s rights issue will have protection and flexibility, a Qatar Stock Exchange (QSE) market notice on rights issue selling norms says.
This is one of QSE’s six points on the Selling Rights Issue Rules pursuant to Qatar Financial Markets Authority (QFMA) Board decision number 3 for year 2014.
A share-holder not intending to buy a listed company’s rights share will have the option of either subscribing or sell the rights – fully or partially in the market as per QFMA regulations, the QSE notice says.
Defining Right Issues, the notice says, “Rights issues are securities that entitle its holders the right to subscribe in the capital increase issued by the company and dedicated to its existing shareholders.
“Rights issues can be listed and sold at the stock exchange. The number of rights issues will be equal to the number of shares in the capital increase to be issued by the company to its existing shareholders through the subscription process.” On the process of selling Rights Issue, “The selling of the rights issues shall be done independently from the original share. Unless provided for otherwise in the QFMA Rules, rights issues selling is subject to the same trading provisions applied to shares. The rights selling period: shall be ten working days.” The norm prohibits selling of bought rights. “Buying investors are not allowed to sell the purchased rights during the selling period.” QSE registered brokerage companies are not allowed to accept selling orders of their clients for the purchased rights during the same session or during the selling period in general. The members have to adjust their systems so as to prohibit the clients from selling the purchased rights through the same brokerage firm.
The Market Operations and Control Department of QSE will cancel any rights selling orders or trades that are entered or executed in violation of the prohibition instructions mentioned above. Cancelations of trades will be reported to QFMA and the violating party shall compensate the aggrieved party where deemed necessary.
A shareholder will lose his rights of subscription if his ownership of shares exceeds the limit stated in the company’s AoS after subscribing to rights shares.
The QSE notice explains in detail the formula of a stock’s reference price calculation (ex-rights price). It is calculated as follows:- Stock”s reference price (ex-rights) = {(existing shares * closing “cum rights” price) (new shares * subscription price)} /(total number of shares after increase).
The fifth point covers the Right’s Reference Price that will be calculated on a daily basis after the end of the selling session. The new calculated price will be the RRP for the following day’s selling session regardless of the actual closing price. Pricing equation will be as follows:- (RRP = Stock’s closing price minus the subscription price).
The sixth and last point covers calculating the daily price limits for the rights according to the following equation:- Daily Right’s price limits = {(Right’s reference price at closing plus or minus the allowed change in the Stock”s price value) / (Right’s reference price at closing) – 1} multiplied by 100%.
Price limits are calculated on a daily basis after the closing of the selling session, to update the trading system before the start of the selling session of the following day, noting that the lowest percentage of the right’s price limit shall be 1% up or down, the QSE notice concluded..
