Right of first refusal, or as I like to call it, freebie shares. Is this the beginning of a new trend where companies are going to be spinning off subsidiary/associate co’s and offering shares of the new IPO to existing shareholders of the existing listed co?
The first one we saw post-lockdown was BWG (Better World Green) with the IPO of ETC (Earthtec) where they offered to existing shareholders:
“At the ratio of 40 shares of the Company to 1 newly issued share of ETC. The fraction of newly issued shares of ETC resulted from the computation will be discarded”
- The IPO of Earthtec was announced on 24 June 2010
- The BWG shareholders right to shares in ETC was announced on 20 June 2020
- The book closing date was 13 July 2020
- Subscription date was 4-6th August 2020
- What was the impact on the share price? It was as high as +50% during the period.
For SCC, at the end of Friday’s (28/08/20) close they announced the following:
“the allocation of up to 169,132,500 newly issued ordinary shares to the shareholders of the Company eligible for the shares allocation in proportion to their shareholding (Pre- emptive Rights), i. e. the shareholders whose names appear in the shareholders’ registration book of the Company as of the Record Date specified by the Board of Directors of the Company, whereas the Board of Directors of the Company has determined that 11 September 2020 be the Record Date (the “Shareholders Eligible for the Shares Allocation”), in a ratio of 7.0950 ordinary shares of the Company to 1 newly issued ordinary share of SCGP (In the case that there are fractions of
shares arising from allocation of the newly issued ordinary shares to Shareholders Eligible for the Shares Allocation, the fractions shall be rounded down)”
Today the share price was the only large cap up ~+3% (market ~-1%). Am I saying that SCC is going to be +20% – + 50% by the time SCGP is listed? No. But I wouldn’t be surprised to see the share price move positively (it only has to be +1% for me to be right….) as long as the petrochem prices and the market doesn’t tank in the next 2 weeks.
Which company could do this next? I wouldn’t be surprised to see VGI try it with Kerry…but given they aren’t the majority/controlling shareholder it is unlikely. Fun times.