You’ve decided to invest in an upcoming right issue. Your opinion of the company’s future growth prospects is positive, and you say to yourself, “can I apply for more shares in rights issue?” Read on and discover what deep value investors know.
Can I Apply for More Shares in Rights Issue?
Yes, you can apply for more shares in rights issue. The process is known as applying for excess shares and is the gateway to answering, can I apply for more shares in rights issue? Let’s start with general facts:
Rights Issue Defined – A rights issue is an offer to existing shareholders to purchase additional shares at a discount. Shareholders purchase the shares directly from the company prior to the shares trading on the open market.
Excess Shares Application – Initially, shareholders are allowed to purchase rights issue shares in proportion to their current company holdings. The company may provide the opportunity to apply for more shares than your original allotment. This option is known as applying for additional shares or excess shares.
Allocation of Shares – Upon conclusion of the rights issue period, any shares not purchased (unsubscribed shares), are allotted to those investors who applied for excess shares. The allotments are distributed on a pro-rated basis or according to the terms and conditions of the rights offer.
Can I apply for more shares in rights issue? Yes, providing the issuing firm extends the option within the terms of the rights issue prospectus.
How Do I Apply for Additional Shares in Rights Issue?
You apply for additional shares in rights issue by familiarizing yourself with the issue prospectus, completing the application, submitting the application and payment, and waiting for the allotment. Here’s the breakdown:
Understanding the Issue Prospectus – Upon receiving the rights issue, familiarize yourself with the prospectus terms and conditions. The prospectus will detail not only the subscription price (discounted share price), and rights ratio but also the application deadline and the excess shares applicant procedure.
Complete the Application – An application accompanies the prospectus. Fill out the entitlement section stating the number of shares you are allowed to purchase based on your current holdings. Complete the excess shares section and indicate the number of additional shares you wish to purchase.
Application and Payment Submission - Complete the application and calculate the payment for the excess shares based on the desired number of shares and the issue’s discounted price. Submit the application and payment as per prospectus instructions.
Allotment Distribution – Once the rights issue period ends, the excess shares applications are processed and allotments are determined. If additional share demand exceeds supply, shares will be distributed on a pro-rata basis and in accordance with the prospectus. The company will notify you as to the number of shares you are to receive and will refund any overpayment.
Can I apply for more shares in rights issue? Yes, you can apply for additional shares by following the instructions provided in the rights issue prospectus. If you have any questions about or during the process, the firm’s Investor Relations department will be a useful resource. Keep the prospectus and copies of your application and payments for the original allotment and the excess shares for your records.
Read next: Right Issue of Shares Calculation: A How-to-Manual
