When you qualify for a rights offer there are two places you will see Letters of Allocation (LOA) when you log in to your EasyEquities account. Read more about how a rights offer works, and what your options are, here:
In your portfolio
If you are a shareholder in a company that is offering a rights offer as at the qualifying date, its LOAs will appear in your portfolio as a shareholding alongside the company’s shares you already own under the “All Holdings” function/option.
Selecting this instrument will give you some helpful information.
Current Value
It will firstly show you the “Current value” of your LOAs. This is because LOAs can actually be bought and sold like ordinary shares and because of that they have a market value attached to them, which like ordinary shares, fluctuates depending on demand in the market.
If you wanted to, you could look at selling your LOAs. The “Current Value” reflects the rand value of your rights and is calculated by multiplying the number of rights by the last traded price in the market. A reminder that prices are 15 minutes delayed on the EasyEquities platform.
If you do want to sell your rights (hence not convert them into ordinary shares) you must reference the “Selling At or Bid” price on the platform, as this could differ from the last price above.
Depending on liquidity and the available market spread you may not be able to execute your sale online. You would need to contact the EasyEquities Trading Desk to assist.
Number of shares
You’ll also be able to see the number of rights (# Shares) you own in the company which the rights offer relates to, and you can use this number to calculate how much to fund your account with should you wish to take up the rights offer.
Example:
You open the LOA instrument shown in your portfolio and it indicates under the # Shares category that you have 100 rights in the company the rights offer relates to.
You also know, based on the information sent to you in the corporate actions email or via the company’s SENS announcement, that the subscription price for this particular rights offer is 50 cents per share.
If you wanted to fully take up your rights in this case you would calculate:
100 shares x 50 cents = R50.
By funding your account with R50 by the required deadline date you would then be able to take up all the rights available to you for the company issuing them. At the date stipulated in your corporate actions email, this amount would be deducted by the EasyEquities team and allocated to more shares in the company the offer relates to.
If you had only funded your account with R25, you would only receive half of the amount of shares.
Alongside all available investments on the platform
As mentioned above, a rights offer can be traded in the market the same way a share can.
Therefore, when there is a rights offer for a particular company, the LOA relating to that rights offer may also appear among other shares when you are browsing companies to invest in.
If you were to select this instrument on the platform you would see that it has a price (and value) associated with it – just like any other share would have. This price is based on demand in the market and the “Buying At or Ask” price indicates how much it would cost you at that time to buy more rights.
This would be in addition to any rights you automatically qualified for as a result of already being a shareholder in that particular company by the qualifying date.
Example:
When browsing available investments you come across a LOA instrument for a company you are interested in. Acquiring the LOA would mean that you have the opportunity to participate in that company’s rights offer to buy additional shares at a discounted price of 50c per share (whilst it's trading at 60c per share).
The ask price indicated for the LOA is 10c.
You call the EasyEquities Trading Desk, and they are able to source additional rights for you in the market at 10c per right. You then proceed and purchase R100 worth of LOAs at the current price, giving you 1000 LOAs in total.
It’s important to note that this is not always possible and that sometimes there are not enough buyers or sellers in the market for a buy or sell transaction to take place.
You can then use these LOAs to participate in the rights offer, allowing you to purchase shares in the company the offer relates to at a discounted price (50c per share). In addition to the 10c paid per right, it is important to note that you still have to pay the conversion price as well, i.e. 50c per share. The applicable funds (R500) need to be available in your account by the deadline date.
Depending on liquidity, buying additional rights may not always be available through the platform and would need to be handled by the EasyEquities Trading Desk.