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Rights issue explanation

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olilau
Frequent Contributor
please excuse the ignoramous basic question, but please explain why : CSP is currently trading at 32c. I hold some shares and I am thus offered shares in terms of the rights issue currently under way. however, the way I read it is that I am offered to take up shares @ 40c in terms of the rights issue. why would I do this if I can get the shares at current MV of 32c ?
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15 REPLIES 15
SimonPB
Valued Contributor
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Not applicable
Simon what are the 1cent shares for? CSP-N? How does this work?
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Not applicable
Simon what are the 1cent shares for? CSP-N? How does this work?
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SimonPB
Valued Contributor
for every 1 you own gives you the right to buy 1 CSP at 40c ..
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md49
Contributor
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olilau
Frequent Contributor
thank you simon. very good question JD, that was my next one also. the rights issue seems to be a 1 for 2 held, fine, so the CSPN's are basically the nil paid shares on offer, right ? but why reflect the "right" in my portfolio at R 0.01 and not at the correct value, ie 0.40 because that is the offer ? the way CSP stands in my portfolio : CSP 4000 shares @ 0.43 = 1732 CSPN 2000 shares @ 0.01 = 20
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olilau
Frequent Contributor
thank you simon. very good question JD, that was my next one also. the rights issue seems to be a 1 for 2 held, fine, so the CSPN's are basically the nil paid shares on offer, right ? but why reflect the "right" in my portfolio at R 0.01 and not at the correct value, ie 0.40 because that is the offer ? the way CSP stands in my portfolio : CSP 4000 shares @ 0.43 = 1732 CSPN 2000 shares @ 0.01 = 20
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SimonPB
Valued Contributor
no, the npl gives you the right to BUY a share at 40c, you have to pay the 40c to take up that right .. they reflect at 1c because that what they trading at
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Not applicable
So is there any potential upside in buying the 1cent. I might have already bought a good couple (hundred thousand) LOL....so I'm asking more out of buyers regret here than anything else.....
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md49
Contributor
Also - up to when can we excersise these rights? does it give you and indefinite time period at which you can buy at 40cents?
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olilau
Frequent Contributor
well, jd, the so called "1c" cannot be bought for 1c, they can only be bought for 40c each which is the rights offer. however, the current bid price on the market is 30c, so as simon says, don't exercise the right. my question to OST was why it gets reflected in this way (at 1c) because its misleading. the value of the rights offer is known, so why not show it at the correct value ? md, the rights offer expires on 18/11.
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SimonPB
Valued Contributor
there is a time limit, week or two as a rule, SENS will give details ..
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SimonPB
Valued Contributor
well the value of the NPL is share price less take up price (40c) .. so if share goes above 40c NPL will start to move higher .. this be the theory
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olilau
Frequent Contributor
thanks simon, that makes sense. now I understand.
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SimonPB
Valued Contributor
the value is reflected at 1c because that is what you can current sell it for .. well actually you can't, but they don't reflect zero unless suspended
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