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What is rights issue
Rights issue means that a listed company issues new shares for existing shareholders to apply for, and shareholders can apply for new shares according to their shareholding ratio. If shareholders do not participate in the rights issue, their interests will be "diluted".
For example, a company uses two for one rights issue, which means that the original shareholders have the right to purchase one more new share for every two existing shares they hold.
1. What is a rights issue?
1.1 What is equity and rights issue
Equity is a right to purchase principal shares, corresponding to principal shares.
The performance form of equity is the same as ordinary stock, with code, name and price.
The naming rules for equity are generally: the name of the underlying stock + "equity".
Rights issue is to purchase a corresponding number of underlying shares at the rights price based on the number of equity positions held.
For example, if you own 5,000 shares of Tencent Holdings and the rights issue price is HK$100.00, you can apply to purchase 5,000 shares of 00700 Tencent Holdings at a price of HK$500,000.00.
1.2 Source of Equity
The stock company distributes equity to all shareholders holding positions, and the exchange directly distributes it to the shareholder's account (the physical stock needs to go through the procedures at the transfer office to obtain the equity).
At this time, the price of the underlying stock will fall, and the value of the drop is exactly equal to the value of the distributed equity.
1.3 Equity transactions
Equity is divided into two types: tradable and non-tradable, which are determined by the distribution company.
Tradable equity: It can be bought and sold like ordinary stocks, with price fluctuations. Customers who buy equity can apply for rights issue.
Non-tradable equity: customers can only choose whether to issue rights, if not, the equity will be cleared.
1.4 The life cycle of equity
The life nodes of equity include: the listing date, the last trading day, the rights issue deadline, and the underlying stock distribution date
The tradable equity is generally only about 5-7 trading days, and can be traded between the listing date and the last trading day.
Rights issues can be applied for between the listing date and the rights issue closing date.
The underlying shares purchased during the rights issue will enter the position on the distribution date of the underlying shares.
1.5 Attributes of Equity
Equity name: the name of the underlying stock + the word equity
Equity code: generally 29XX or 44XXX
Principal stock name: corresponding principal stock
Stock code: the corresponding stock code
Shares per lot: the number of shares per lot traded
Rights issue price: The price at which the underlying shares are purchased at the time of the rights issue
Is it tradable: yes/no, the code rule for tradable rights is 029XX, and the code rule for non-tradable rights is 44XXX
1.6 Treatment of Equity
Tradeable Equity: Sell, Rights Issue, Leave it alone
Non-tradable equity: rights issue, hands-off
It can be seen that there are not many choices for customers. Either they spend money on rights issues, or if they let it go, the end result is automatic clearing, and customers will lose their equity assets.
2. Risk Disclosure Statement and Huaying Disclaimer
In order to protect the interests of investors and avoid losses, it is necessary to understand
2.1 The rights issue is not a stock, with high leverage and a short trading date. If you do not choose the rights issue after the expiration, you will generally lose all your investment principal;
2.2 During the period from the selection of rights issue to the distribution of shares, investors need to bear the risk of falling stock prices;
2.3 Investors need to pay attention to the transaction/rights issue date of the relevant rights shares, and Huaying Securities will only make obligatory reminders;
2.4 Low flexibility, high leverage ratio and high risk
The flexibility of rights issue through rights issue is lower than that of buying underlying stock. After buying the underlying stock in the market, if the stock price rises sharply, you can sell it immediately to make money, and if the stock price falls sharply, you can stop the loss immediately. However, to absorb underlying shares by purchasing rights shares, you have to bear the fluctuation of stock price between the new share subscription period and the purchase of rights shares.
Buying and selling rights shares seems to use less money to indirectly earn the same amount as the underlying shares, but it also reflects that its high leverage ratio, coupled with the short transaction period, makes the investment risk not low. When the trading of the underlying shares is sparse, the risk of speculating in rights shares is even greater. Since there are only a few days of trading time, there will be "no revenge" for misreading the market.
If the stock price of the underlying stock after ex-rights rises or falls, the rise and fall of the rights equity will far exceed the underlying stock price, which has a considerable leverage effect. The greater the leverage of rights rights, the higher the price volatility, which greatly increases the risk of short-term speculation.
What is rights issue
Except for public holidays and the market closure due to bad weather, the Hong Kong stock market generally trades from Monday to Friday. The trading hours are as follows:
1. Pre-open Period
Enter order 9:00-9:15
Submit, modify, and cancel auction market orders and auction limit orders
Only at-auction market orders and at-auction limit orders can be submitted, and orders cannot be withdrawn or modified
Random match period 9:20-9:22 (match will start randomly at 9:20-9:22 at the final reference equilibrium price)
Conduct matchmaking during auction period
Pause period, from random match period ends to 9:30
At-auction order: Incomplete order will be cancelled by the system; At-auction limit order: If the input price range of an incomplete order does not deviate from the nominal price by nine times or more, it will be converted to a limit order and automatically transferred to the continuous trading session
Closed at noon
3. Closing Auction Trading Session
Closing auction period 16:00-16:01
Calculate and publish reference price; orders cannot be submitted
Enter order 16:01-16:06
You can submit, modify, and cancel at-auction market orders and auction limit orders. The price limit of auction limit orders shall not exceed ±5% of the reference price
At-auction market orders and at-auction limit orders can be submitted, and cannot be cancelled or changed; the input price of at-auction limit orders must be between the lowest selling price and the highest bidding price
Random closing 16:08-16:10
At random closing time, at-auction market orders and at-auction limit orders can still be submitted, and cannot be cancelled or changed; the input price of auction limit orders must be between the lowest selling price and the highest bidding price