Rights issues

Financial intermediaries

When a listed company conducts a rights issue, if you are a qualified shareholder, you will receive a number of "nil-paid rights". You should note that the "rights" are automatically credited to your account, so you may be required to pay a fee for your allotment whether you will take up any rights shares or not.

So, how will my intermediary charge me in a rights issue?

You may be required to pay a scrip fee and a corporate actions service fee.

Scrip fee

In a rights issue, CCASS charges its participants (e.g. banks or brokerages) a scrip fee of $1.5 per board lot on the book-close date announced by the listed company, calculated according to the net increase in aggregate balance of that stock in a participant's account over the last collection date. If the closing price of the stock is lower than the price of the rights shares (i.e. out-of-the-money) on the ex-rights day (i.e. 2 trading days before the first day of the book close period), CCASS will waive the scrip fee.

Corporate actions service fee

Moreover, when an intermediary exercises the nil-paid rights on behalf of its clients, CCASS will levy a corporate actions service fee of $0.8 per board lot, calculated according to the number of board lots of rights taken up subject to a maximum of $10,000 per instruction per participant.

Normally, intermediaries will collect the scrip fee on those clients who hold the stock concerned. Note that you need to bear the scrip fee even if you have no intention to take up any rights shares. When intermediaries get instructions from their clients to subscribe for the rights shares, some intermediaries may charge a fee based on the number of board lots of rights shares subscribed. Others may simply levy a flat fee or some may set a combination of both.

Example: Assuming you hold 100 board lots of Company G shares. The company announces a 5-for-1 rights issue in the proportion of one rights share for every existing 5 shares in September. As a result, 20 board lots of nil-paid rights are allotted to you. You decide to take up only half of them, i.e. 10 board lots.

Assuming your intermediary charges a scrip fee of $1.5 per board lot and $1 per board lot of rights shares you take up. Then, firstly, you need to pay a scrip fee of $150 for your 100 board lots of Company G shares. Secondly, as you exercise 10 board lots of rights, you need to pay $0.8 per board lot.