I understand that there are some confusion regarding SIA’s upcoming rights issue. What I’m going to do here is to explain everything in simple layman terms (based on my understanding from reading the related documents, as well as checking with my relationship manager from DBS Treasures):
1. Rights Share Issue
For every 2 SIA shares that you own, you will have 3 rights shares (available to you at zero cost). For instance, if you have a total of 1,000 SIA shares, then you will have a total of 1,500 rights shares.
The rights shares will be deposited directly to your CDP/custodian account – I checked with my DBS Treasures relationship manager regarding this, and for DBS Treasures, they will be credited to my custodian account by 11 May.
There are two things you can do with the rights share issue:
i. Sell your rights – You can sell your rights on the open market (just like you buy/sell shares) between 13 May, from 9am, and 21 May at 5pm. The name of the rights will be “SIA R” and the ticker symbol will be “LRDR”
ii. Exercise your rights – If you want to exercise your rights, you will have to pay $3.00/right to convert your rights into SIA shares. The deadline to do so will be on 28 May, at 5pm. As my SIA shares are under DBS Treasures’ custodian account, I have checked with my relationship manager on the deadline to exercise the rights and I was advised to do so by 20 May. Also, from my understanding from my relationship manager, should I exercise my rights, then the number of rights I choose to exercise (and paid up for) will be converted to SIA shares on 29 May, after which I will be able to sell on the open market just like any SIA shares under the ticker symbol “C6L”
2. Rights MCB
For every 100 SIA that you own, you will be entitled to 295 rights MCB (available to you at zero cost). For instance, if you have a total of 1,000 SIA shares, then you will receive a total of 2,950 rights MCB.
Just like the rights shares, the rights MCB will also be deposited directly to your CDP/custodian account – if you are a DBS Treasures customer like me, I understand from my relationship manager that they will be credited to my custodian account by 11 May as well.
Similar to the rights shares, there are two things you can do with your rights MCB at hand:
i. Sell your rights – you can sell your rights MCB on the open market between 13-21 May. The name of the rights MCB will be “SIA MCB R”, and the ticker symbol will be “GANR”
ii. Exercise your rights – You can convert your rights to bonds at $1.00 per right, and you have to do so by 28 May 2020, by 5pm (just like the deadline for exercising your rights shares, if you are using DBS Treasures like me, then you may want to do so by 20 May, according to my relationship manager.)
However, do take note that this is a “zero coupon” bond. Meaning you do not get any dividends from the bond. Upon the 10-year maturity, you will be able to get back $1,806.11 for every $1,000 principal – but do take note here that the $1,806.11 you’ll be getting back is not in cash, but in SIA shares at $4.84/share (based on the $1,806.11 you will be able to get back converted to SIA shares at $4.84/share, you will be able to get about 373 SIA shares.)
The only time you will be able to receive cash for your bonds is if SIA decides to call back the bonds before the 10 year period (the bond is callable every 6 months), and depending on the year they call back the bonds, you will be able to receive a yield ranging between 4-6%.
I hope the above explanation helps. At the time of writing, I am a shareholder of SIA, and I will most likely subscribe to the rights share issue.
Please do your own due diligence before you make any decisions on your rights share issue and rights MCB if you have them. If you have any additional questions about it, please feel free to leave your comment below, or you can send me a private message here – I’ll try to answer each and every one of them to the very best of my ability.
Disclaimer: At the time of writing, I am a shareholder of Singapore Airlines Limited.
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