Friday, November 6, 2015

Applying for Rights and Excess Rights with Standard Chartered Bank: Croesus 22 for 100 Rights Issue

Many thanks and countless gratitude to LP for his extremely informative posts on this rights issue. This was my first time applying for excess rights, so I was a bit lost about what I should be doing and what are the important dates I need to be aware of.

For the Casual Croesus Rights Players
For the Advanced Croesus Rights Players

For me, I owned 1000 shares of Croesus Retail Trust, which means that I was entitled to 220 Rights. With these 220 Rights, I am able to purchase 220 shares at $0.61, which is about 25% cheaper than the TERP of $0.815. I also applied for 280 excess rights.

Summary Timeline:
9 Oct - 1st day of rights trading and subscription for entitlement and excess
12 Oct - SMS from SCB
14 Oct - Call to SCB to confirm rights entitlement subscription and excess rights subscription
16 Oct - SCB corporate action closes
19 Oct - Last day of Rights trading
23 Oct - Last day to subscribe for entitlement and excess
3 Nov - 1st day of trading with Rights units

Long Story
I received an SMS from Standard Chartered on 12th Oct Monday at about 4pm to give them a call by 16th Oct 5pm. However, I was too busy to call back, so I only got around to calling back on 14th Oct in the morning at 10am.

After calling the hotline in the SMS, I was talking to a real life person without too much button pressing through the phone directory. After a quick verification, I was presented with 4 options which were read out to me by the operator:

1) EXERCISE entitled rights
2) LAPSE
3) OVER SUBSCRIBE to excess rights
4) SELL RIGHTS

Of course, I subscribed to my entitled rights of 220. However, I also elected to subscribe for 280 excess rights.

I was informed that my account would then be debited $305 to pay for all theses shares if I do get all the excess rights that I applied for.
(220+280) X $0.61 = $305

After I said it was fine, they proceeded to verify that I had enough money in my account, which they then debited.

Finally, they repeated my corporate actions chosen to me again, and told me that another rep from SCB will be calling me again to double-confirm my decision.

At about 3pm, I got a called, but I missed it. SCB sent me a message 15 minutes later informing me that I could not be reached and I should ring them up at a certain hotline.

I called back, and I was talking to a real person rather quickly again. After verification, the operator checked with the corporate action team about my account, then returned to confirm that it was a call to confirm my earlier decision. She just read out my instructions, verified it and bid me good day.

Fast forward to 5th November, I eagerly checked my SCB account to see what I got. I was allocated the entire excess rights amount that I applied for, all 280 excess rights! Wow. Maybe I should have applied for more then? How do I know what other people got? Well, luckily someone else did some legwork! As Derek writes, someone with 1000 shares got allocated 480 excess rights on top of his 220 entitlement! So why exactly did I apply for only 280 excess rights? I don't know actually, but on hindsight, I think I should have applied for more excess rights!

Honestly, I thought this whole process was as easy as pie. I didn't have to go down to an ATM to apply for my rights and excess rights, I didn't have to flip through a thick stack of papers and it took me all of maybe 5 minutes of my life to get this all settled.

The final outcome is that I got 500 shares of Croesus at a pretty price of $0.61. This makes my total investment in Croesus to 1500 shares and lowers my average price to $0.787, which is lower than the TERP, which is a good sign I guess.

Personally, I am very happy with SCB as my broker. Not only are fees rock-bottom dirt cheap, but things are pretty simple and easy with them. I guess the only gripe (if I had to pick one) is the relatively short window to decide and confirm the corporate action. From notice to closure, there is just 3.5 days to contact SCB and inform them of your decision.

The bright spot to this is that there is a *default* option that will be selected and enacted out by the bank if they get no response from shareholders. In this case, the default option was to just do nothing and let the rights lapse. If the default option was to sell off the rights at market rate after the last day that SCB accepts corporate action instructions and credit the amount to the trading account, SCB would be an absolute winner in my book.

For someone with a portfolio of about $20,000 and holding 39 stocks, can you believe that I have only paid about $70 worth of broker commissions so far? My current average transaction amount is only a paltry $250, of which I pay an average of $0.66 of commission per transaction!

I am a really happy brokerage customer of SCB. I have to be frank, they aren't the fastest people, but I think it's good enough for me, especially when you consider the amount of fees you're paying them to do all this work, which is zilch. For investors starting out with not much capital (I started my first investment with just $900), I strongly recommend SCB as a broker to be considered!

5 comments:

  1. Croesus is on my watchlist too! Congrats on getting the excess rights. :)

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  2. Hi GMGH, a big thanks for the detailed write up on SCB rights issue. Looking forward to another scenario should u choose to SELL rights. By the way, I wonder what is the maximum limit for EXCESS rights, or no limits? J.S.

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  3. I only know basic investing so such idiot's guides from you and LP are really god sent. Thank You.

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  4. Another advantage is that you save $2 commission fee if you have used the ATM to buy the rights.

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  5. HI GMGH,

    Aiya, I wish you have told me you have small amt. From history, it can be seen that those with lesser no of shares will always have a lot more excess rights allocated to them. There's no limit to the amount you can apply, so might as well haha! Good lesson going forward. If there's anything to say about reits, it's that you can guarantee they will have rights again in the future.

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