<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Time to line up the FTrash directors to be shot?! When's the AGM? Shareholders can go there to whack them HARD and table a motion for their resignation!
March 11, 2009
NEWS ANALYSIS
</TR><!-- headline one : start --><TR>Rights issues send wrong signals
</TR><!-- headline one : end --><TR>Cash-strapped investors unhappy about parting with more money </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Lee Su Shyan , ASSISTANT MONEY EDITOR
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Chartered Semiconductor Manufacturing's announcement of a rights issue on Monday sent its shares plunging nearly 40 per cent. -- PHOTO: BLOOMBERG
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->RIGHTS issues are fast turning into the bane of the stock market. Announce one and the stock goes south in a vicious selldown that only adds to the negative sentiment.
Chartered Semiconductor Manufacturing provides the latest painful example: Its announcement on Monday that it will raise US$300 million (S$460 million) sent the shares plunging nearly 40 per cent.
The stock ended 8 Singapore cents down at 12.5 cents with 80.1 million shares changing hands yesterday - and that was after it sank from 25 cents to 20.5 cents on Monday morning on speculation of the rights issue.
With the shares at 12.5 cents, the new rights stock priced at seven cents looks less appealing.
Shareholders no longer see such issues as a chance to be the first in queue to buy more shares at an attractive price but as stark signals that the company is in troubled waters.
Especially with a hefty 66 per cent discount as in Chartered's case.
Investors are so jittery now that even the mere hint of a rights issue is enough to drive the shares downwards.
Neptune Orient Lines (NOL) lost 8.5 cents or 8.3 per cent yesterday to close at 93.5 cents on rumours that it was also about to tap shareholders. NOL had to issue a statement to calm speculation, saying that it 'continually evaluates all available options to improve its performance and strategic position' but that it is the company's policy 'not to comment on market rumour or speculation'.
Mr Kevin Scully, executive chairman of boutique corporate finance firm NRA Capital, said the market's reaction 'is related to the perception of the financial strength of a company'.
For example, Chartered is arguably the weakest of the largest companies that have unveiled rights issues so far, lagging behind heavyweights like DBS Bank, CapitaLand and CapitaMall Trust.
The chipmaker was in the red last year and could do with more liquidity.
Timing has had much to do with the sour reaction to various cash calls.
March has been a dire one for equities, with many investors giving up guessing where the bottom of the stock market might be. In fact, Chartered launched its rights issue on the day the Straits Times Index hit a near six-year low.
Investors are also running out of money, having shelled out for firms like DBS that had taken the first-mover advantage.
As the more vulnerable firms head to the market with hands outstretched, investors, some cash-strapped, are getting wary about parting with their money because they are worried that the company may be heading into trouble.
The problem is that if shareholders turn too pessimistic, the rights issue will almost be set to fail.
On Monday, HSBC shares plunged 24 per cent to HK$33, precariously close to the HK$28 rights issue price, although they have rebounded somewhat since. Or take property player Bukit Sembawang Estates, which is raising money from a rights issue. Its shares closed at $2.26 yesterday - four cents below its rights issue price of $2.30, so no shareholder in his right mind will take up the issue.
Rights issues are usually seen as better than placements because the latter are offered only to certain people and therefore do not benefit everybody equally.
They are also seen as a way of letting existing shareholders buy more shares at an attractive price - a reward, in other words, to loyal investors rather than newcomers.
But in these nervous times, it looks as if shareholders are happier keeping their money under the mattress. [email protected]
March 11, 2009
NEWS ANALYSIS
</TR><!-- headline one : start --><TR>Rights issues send wrong signals
</TR><!-- headline one : end --><TR>Cash-strapped investors unhappy about parting with more money </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Lee Su Shyan , ASSISTANT MONEY EDITOR
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
Chartered Semiconductor Manufacturing's announcement of a rights issue on Monday sent its shares plunging nearly 40 per cent. -- PHOTO: BLOOMBERG
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->RIGHTS issues are fast turning into the bane of the stock market. Announce one and the stock goes south in a vicious selldown that only adds to the negative sentiment.
Chartered Semiconductor Manufacturing provides the latest painful example: Its announcement on Monday that it will raise US$300 million (S$460 million) sent the shares plunging nearly 40 per cent.
The stock ended 8 Singapore cents down at 12.5 cents with 80.1 million shares changing hands yesterday - and that was after it sank from 25 cents to 20.5 cents on Monday morning on speculation of the rights issue.
With the shares at 12.5 cents, the new rights stock priced at seven cents looks less appealing.
Shareholders no longer see such issues as a chance to be the first in queue to buy more shares at an attractive price but as stark signals that the company is in troubled waters.
Especially with a hefty 66 per cent discount as in Chartered's case.
Investors are so jittery now that even the mere hint of a rights issue is enough to drive the shares downwards.
Neptune Orient Lines (NOL) lost 8.5 cents or 8.3 per cent yesterday to close at 93.5 cents on rumours that it was also about to tap shareholders. NOL had to issue a statement to calm speculation, saying that it 'continually evaluates all available options to improve its performance and strategic position' but that it is the company's policy 'not to comment on market rumour or speculation'.
Mr Kevin Scully, executive chairman of boutique corporate finance firm NRA Capital, said the market's reaction 'is related to the perception of the financial strength of a company'.
For example, Chartered is arguably the weakest of the largest companies that have unveiled rights issues so far, lagging behind heavyweights like DBS Bank, CapitaLand and CapitaMall Trust.
The chipmaker was in the red last year and could do with more liquidity.
Timing has had much to do with the sour reaction to various cash calls.
March has been a dire one for equities, with many investors giving up guessing where the bottom of the stock market might be. In fact, Chartered launched its rights issue on the day the Straits Times Index hit a near six-year low.
Investors are also running out of money, having shelled out for firms like DBS that had taken the first-mover advantage.
As the more vulnerable firms head to the market with hands outstretched, investors, some cash-strapped, are getting wary about parting with their money because they are worried that the company may be heading into trouble.
The problem is that if shareholders turn too pessimistic, the rights issue will almost be set to fail.
On Monday, HSBC shares plunged 24 per cent to HK$33, precariously close to the HK$28 rights issue price, although they have rebounded somewhat since. Or take property player Bukit Sembawang Estates, which is raising money from a rights issue. Its shares closed at $2.26 yesterday - four cents below its rights issue price of $2.30, so no shareholder in his right mind will take up the issue.
Rights issues are usually seen as better than placements because the latter are offered only to certain people and therefore do not benefit everybody equally.
They are also seen as a way of letting existing shareholders buy more shares at an attractive price - a reward, in other words, to loyal investors rather than newcomers.
But in these nervous times, it looks as if shareholders are happier keeping their money under the mattress. [email protected]
