What is the difference between mandatory and voluntary corporate actions?
Mandatory affects all shareholders where as voluntary shareholders can elect to participate.
How many days before record date must dividend be declared?
13
When is last day to trade cum dividends?
Usually, 3 days before record date
What is a capitalization issue?
Shareholders receive additional shares for free.
What effect does a capitalization issue have on the SFP?
Share capital increases and reserves decrease.
What is the opposite of a stock split?
Share consolidation
What are the listing requirements for a share buy back? (2)
- Limited to max of 20% of companies issued shares per year.
- Quality and price must be announced with every 3% bought back.
What is a rights issue?
Shareholders obtain the right to purchase additional shares in the company.
What will be announced on announcement date of a rights issue? (3)
Issue ratio, issue price announced, record and closing date
What is underwriting?
Where large financial institution undertakes to buy all shares which are not sold during the right issue at issue price or lower.
What is the formula for number of new shares?
capital required/issue price
What is the formula for the issue ratio?
Existing number of shares/ planned number of new shares issued
What are advantages of a rights issue? (2)
Additional capital and positive leverage effect between issue and market price.
What are disadvantages of a rights issue? (3)
Existing shareholders must increase investment to maintain proportional shareholding, negative effect on sfp value, underwriting normally below issue price.
What is the formula for the theoretical value of pref rights during cum pref period of rights issue?
MP of shares during cum rights - issue p per share/ issue ratio + 1
What is the formula for the theoretical value of pref rights during ex rights period?
Theoretical MP of shares during ex - issue price per share/ issue ratio.
What is the formula for the theoretical mp of shares during ex rights period?
(num of exist. shares in issue ratio * cum rights mp) + ( num of new shares in issue ratio * issue price) / sum of new and existing shares
