UnUsUaL

[karlmarx]

Most highly UnUsUal, indeed!

I recalled a similar post you made on such maneuvers when I saw the odd number of bonus issue.

[weijian]

Most highly UnUsUal, indeed!

I recalled a similar post you made on such maneuvers when I saw the odd number of bonus issue.

That should be in the Penguin thread, when some Penguin-ites were still debating why the odd ratio of the share consolidation - Some said it was probably because Mgt didn't want to (1) increase absolute share price by too much and reduce share count liquidity - ie. OPMI friendly behavior or (2) do multiple consolidations if share price continues to drop....but i like to believe the truth is most probably far from either.

Such odd ratios work both ways then - dividing the same pie into more parts (bonus) or less parts (share consolidation), for the benefit of the major shareholder. Sometimes, this trick is also used when companies spin off their subsidiary via capital reduction and distribute all the shares to shareholders. Unless it is 1 subsidiary share for 1 mother share (like what PanUnited does for its XingHua Group's spin off) or other friendlier ratios, i have met occurrences like "0.9437 subsidiary share for 1 parent share" (with fractional shares disregarded again) to penalize OPMIs as well.

[cif5000]

It seems like the corporate exercise is a 3 for 5 "bonus" issue, announced yesterday.

http://infopub.sgx.com/FileOpen/UnUsUaL%...eID=476463

As usual, the unusual thing about this would be the "3 for 5" number that ignores fractional entitlements.

Assume a hypothetical company that has 1 major shareholder A and 3 OPMIs - B/C/D (each with same shares) and they do similarly announce a 3-for-5 bonus issue:

Original share count (%)               Bonus entitlement (share count)               Share count after bonus issue (%)
A 208 (79.39%)                          124                                                         208+124 = 332 (79.81%)
B 18 (6.87%)                               10                                                           18+10 = 28 (6.73%)
C 18 (6.87%)                               10                                                           18+10 = 28 (6.73%)
D 18 (6.87%)                               10                                                           18+10 = 28 (6.73%)
Total 262 (100%)                         10                                                            18+10 = 28 (6.73%)


After the bonus issue of 3-for-5, major shareholder A miraculously own 0.42% more of the company now, with no extra money required. Is that UnUsual?

Since Unusual shares (share count: 643,237,059) are traded in lots of 100 and there are no shareholders with less than 100 shares, the dilution due to elimination of fractional entitlements is not as severe as the hypothetical company.

Just by a 10x increase in share count, the problem miraculously disappears.

Original share count (%)               Bonus entitlement (share count)               Share count after bonus issue (%)
A 2080 (79.39%)                          1248                                                         2080+1248= 3328 (79.39%)
B 180 (6.87%)                               108                                                           180+108 = 288 (6.87%) 
C 180 (6.87%)                               108                                                           180+108 = 288 (6.87%) 
D 180 (6.87%)                               108                                                           180+108 = 28 (6.87%) 
Total 2620 (100%)

[weijian]

Since Unusual shares (share count: 643,237,059) are traded in lots of 100 and there are no shareholders with less than 100 shares, the dilution due to elimination of fractional entitlements is not as severe as the hypothetical company.

Just by a 10x increase in share count, the problem miraculously disappears.

Original share count (%)               Bonus entitlement (share count)               Share count after bonus issue (%)
A 2080 (79.39%)                          1248                                                         2080+1248= 3328 (79.39%)
B 180 (6.87%)                               108                                                           180+108 = 288 (6.87%) 
C 180 (6.87%)                               108                                                           180+108 = 288 (6.87%) 
D 180 (6.87%)                               108                                                           180+108 = 28 (6.87%) 
Total 2620 (100%)

hi cif5000,
you are right that i have UnUsually exaggerated the problem! Thanks for pointing out the diff between theory and practice.