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SIA rights at $3 - should shareholders take it up?
31 Mar 2020 (56 views)


Maria May said.
Mr Tan
Appreciate your reflection.
It runs contrary to our State Media but there is a a wide-range of argument whether to pick the rights issue or not.

It is understandable difficult to see how SIA can go forward to claim their former glory even with Temasek's support. The pure airline industry profits are often razor thin hovering between 5 to 10%.

For the many who view SIA like many others blue chips as their retirement assurity, the rights issue may be a burden or are useless. It is a very expensive exercise for the man in the street if they fear dilution and coupled with the current economic deterioration.

The proposed 3 rights shares for 2 existing shares would mean if you have 2000 existing SIA shares, you have to fork out $9000 cash to subscibe 3000 rights shares.

For those who buy regularly as a "saving plan" may even have more collected over the years and suppose if they have 4000 existing SIA shares they would need to be out of pocket of $18000 cash (cannot use credit card) for 6000 rights.
Would anybody be surprise if there would be not many average family in Singapore with $18,000 lying in their bank doing nothing or not reserving it for their children's education or for some special purpose.

It is a lot of money for the average family and the fact that no one is sure if SIA would head towards NOL destiny or become a penny stock eventually, it becomes a challenge to decide whether to pick up the rights issue?

Hence, would there be an expected a flood of excess rights that is not taken up?

Who would benefit (really)? Needless to say, SIA is the main beneficiary. Temasek who already made it clear, they would take up all the excess unwanted rights issue. Cheap for them instead of buying off at the current market price. In addition, they increase their share of SIA from 55% to ...... What about the mums and pops? Their hard earn saving, even on a National Asset, is not only not safe but eventually will be diluted with reduced value.

I believe there was little after thought on the decisions made by our policy makers except the need to speedily at all cost to create a package to save SIA's reputation and a few other individual's reputation. Why must Singapore always choose to punish her own people in any small or big ways regardless of the circumstances?

TKL REPLY
Here is my reflection.
If you are an existing SIA shareholder, you will be asked to take up 3 new shares (at $3) for every 2 shares that you hold. For example, if you hold 10,000 shares, you will be asked to take up 15,000 new shares at $3. You have to fork out $45,000.

If you do not have the money to take up the shares, you can sell the rights in the market. The market price will probably be $1.20 per right (but could be slightly less). Your 15,000 rights can give up $18,000 (or slightly less).

At that time, the price for the existing share will drop by $1.80 (or thereabouts), so your 10,000 shares would drop by $18,000 (or thereabouts).

This is how a rights issue works. I hope that it clarifies.


SIA rights at $3 - should shareholders take it up?
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Maria May said.
Mr Tan
Appreciate your reflection.
It runs contrary to our State Media but there is a a wide-range of argument whether to pick the rights issue or not.

It is understandable difficult to see how SIA can go forward to claim their former glory even with Temasek's support. The pure airline industry profits are often razor thin hovering between 5 to 10%.

For the many who view SIA like many others blue chips as their retirement assurity, the rights issue may be a burden or are useless. It is a very expensive exercise for the man in the street if they fear dilution and coupled with the current economic deterioration.

The proposed 3 rights shares for 2 existing shares would mean if you have 2000 existing SIA shares, you have to fork out $9000 cash to subscibe 3000 rights shares.

For those who buy regularly as a "saving plan" may even have more collected over the years and suppose if they have 4000 existing SIA shares they would need to be out of pocket of $18000 cash (cannot use credit card) for 6000 rights.
Would anybody be surprise if there would be not many average family in Singapore with $18,000 lying in their bank doing nothing or not reserving it for their children's education or for some special purpose.

It is a lot of money for the average family and the fact that no one is sure if SIA would head towards NOL destiny or become a penny stock eventually, it becomes a challenge to decide whether to pick up the rights issue?

Hence, would there be an expected a flood of excess rights that is not taken up?

Who would benefit (really)? Needless to say, SIA is the main beneficiary. Temasek who already made it clear, they would take up all the excess unwanted rights issue. Cheap for them instead of buying off at the current market price. In addition, they increase their share of SIA from 55% to ...... What about the mums and pops? Their hard earn saving, even on a National Asset, is not only not safe but eventually will be diluted with reduced value.

I believe there was little after thought on the decisions made by our policy makers except the need to speedily at all cost to create a package to save SIA's reputation and a few other individual's reputation. Why must Singapore always choose to punish her own people in any small or big ways regardless of the circumstances?

TKL REPLY
Here is my reflection.
If you are an existing SIA shareholder, you will be asked to take up 3 new shares (at $3) for every 2 shares that you hold. For example, if you hold 10,000 shares, you will be asked to take up 15,000 new shares at $3. You have to fork out $45,000.

If you do not have the money to take up the shares, you can sell the rights in the market. The market price will probably be $1.20 per right (but could be slightly less). Your 15,000 rights can give up $18,000 (or slightly less).

At that time, the price for the existing share will drop by $1.80 (or thereabouts), so your 10,000 shares would drop by $18,000 (or thereabouts).

This is how a rights issue works. I hope that it clarifies.