Important Dates of Corporate Exercises

When investing in stock market, inevitably we will come across dividends, bonus issue, rights issue etc.

Companies will announce such exercises through Bursa announcement and it usually contains a few dates. These dates can be confusing especially for beginners.

Lets study these dates with real examples.

Dividends

MI announced interim dividend of 3 sen per share on 23 Oct 2020. 

The most important date here is the Ex-Date, which is 9 Nov 2020. 

If you own MI shares after the market closed ON 8 Nov 2020, you will be entitled to the dividends.

On Ex-date (9 Nov 2020), MI's share price will be adjusted 3 sen lower. If you only buy MI shares on 9 Nov 2020 or later, you will NOT get the dividends.

If share price of MI closes at RM4.50 on 8 Nov 2020, it will start from RM4.47 before the trading start on 9 Nov 2020.

If you have MI shares on 8 Nov 2020 and sell all of them on 9 Nov 2020, will you still get the dividends? The answer is YES.

The entitlement date of 10 Nov 2020 is just the date the company share registrars check out for eligible shareholders and investors can ignore this date.

Payment date of 23 Nov 2020 is the day the dividend (cash) is paid to you. If you have a direct share trading account, the dividend will appear in your bank account on the same day. If you use nominee account, you will only get the cash a few days after the payment date.

Financial Year End date of 31 Dec 2020 means that this dividend is for financial year of 2020. As it is an interim dividend (not final dividend), the company might give more dividend for the same financial year of 2020 but it might not do so if it has cash flow issue later.

Bonus Issue

On 5 Oct 2020, Rubberex announced Bonus Issue of 2 bonus shares for one existing share.

Similarly, the most important date is Ex-Date which is 19 Oct 2020. Entitlement date can be ignored as explained earlier.

To be entitled for bonus shares, investors should have its shares BEFORE the Ex-date, which is after the market closed on 18 Oct 2020. 

On the Ex-date of 19 Oct 2020, its share price has already been adjusted lower accordingly so it's too late to buy its shares to get the bonus shares.

There is another date which is the Listing Date of 21 Oct 2020. After the Ex-date on 19 Oct 2020, shareholders still won't see those bonus shares in their CDS account, as it can only be seen on listing date.

If you have 1000 shares on 18 Oct 2020, you are entitled to 2000 bonus shares. If you sell all 1000 shares on Ex-date of 19 Oct 2020, you can still get 2000 bonus shares on listing date.

Rubberex's share price closed at RM7.71 before the Ex-date. How to know the adjusted share price on the ex-date? 

As one existing share is entitled to 2 bonus shares, if you have one share before the bonus issue, after the bonus issue you will have total 3 shares.

Your overall shares value is the same before and after the bonus issue, thus

1 x 7.71 = 3 x (new share price)

new share price = RM2.57

Rights Issue

On 13 Oct 2020, Jaks confirmed the entitlement basis and dates of its rights issue with free warrants.

As the Ex-Date is 26 Oct 2020, investors who wish to subscribe to this rights issue must have Jaks shares in their CDS account BEFORE (not including) 26 Oct 2020.

On the Ex-date (26 Oct 2020), Jaks share price will be adjusted lower and investors who buy Jaks mother shares on this date or later will not get the rights issue.

About the entitlement date of 27 Oct 2020, investors can just ignore it.

Rights issue is more complicated because shareholders while entitled to subscribe to rights shares after Ex-date, can still sell their rights in open market to other investors. There is a time frame to do so.

Investors without any Jaks mother shares can buy those rights from eligible shareholders.

For those rights holders who wish to subscribe to the rights, they need to pay for it before the closing date.

The trading of rights (as Jaks-OR) in open market starts on the commencement date of 28 Oct 2020 until 4 Nov 2020, as the date of cessation of trading of rights is 5 Nov 2020 and the last date for sale of provisional allotment of rights is 4 Nov 2020.

The Despatch Date of 30 Oct 2020 refers to the date when the subscription forms will be sent to eligible shareholders via mail.

Investor with the rights and wish to subscribe to them must fill up the forms and settle the payment on or before 12 Nov 2020, as the last date for acceptance and payment is 12 Nov 2020.

On 18 Nov 2020, the company will announce the final subscription result whether it is under-subscribed or fully subscribed.

Then on 26 Nov 2020 which is the listing date, the rights shares will appear in the CDS account of those subscribers and are available for trading.

How to calculate the adjusted share price after the Ex-date?

If you have 5 Jaks shares, you are entitled to 8 rights shares at 22 sen each. 

Jaks share price was 88 sen a day before Ex-date, so your shares value is (5 x 0.88) = RM4.40

As you buy 8 rights shares at 22 sen each, your cost will be 8 x 0.22 = RMR1.76.

Your overall cost will be 4.4 + 1.76 = RM6.16.

After the rights issue, you will have 5+8 = 13 Jaks shares. 

So, 6.16 = 13 x p (p = Jaks share price after Ex-date)

p = RM0.4738, rounded up to RM0.47.

This calculation does not include the "free warrants". The value of each warrant should be (new Jaks mother share price - exercise price) and you will have 4 warrants after the exercise. 

So, (5 x 0.88) + (8 x 0.22) = 13p + 4(p - 0.49)

p = 0.4776, rounded up to RM0.47, not RM0.48 as you won't get more than you are supposed to have.

Both calculations also end up in 47 sen, which is exactly Jaks's share price on Ex-date.

I'm not sure which calculation is accurate. If you think that the warrants are really FREE, then we can use the first calculation.

Apart from dividends, bonus issue and rights issue, other corporate exercises such as share split and share consolidation are not that common.

The most important date for share split and consolidation is also the Ex-date.

Remember that the Ex-date is the day the share price will be adjusted, so if you want to participate in the corporate exercises or get the dividends, then you must have the shares BEFORE Ex-date.