SEYB Rights Issue

Light of Hope · 1 SEYB Rights Issue Mon Apr 04, 2011 8:10 am

Light of Hope

Vice President - Equity Analytics

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Please explain the rights process of SEYB..

How will this affect the stock price?
If not invested on the rigts, is the invester loosing?
Have they given any dates?
Any thing to know about this, which could influence the decision.

Thank you for your valuable inputs sunny

raa · 2 Re: SEYB Rights Issue Mon Apr 04, 2011 10:04 am

raa

Manager - Equity Analytics

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Seylan Bank announced a rights issue on March 1st to the tune of 1 right for every 3 voting and non-voting shares you own (by the XR date. Dates are yet to be announced, expect it sometime soon). In short the process is that, you are allocated the rights for whatever shares you own by the XR date. Any purchases after this date does not entitle you to any rights. You have two options then, either purchase the right @75 per right (voting) & @35rs per right (non-voting) or you can list them on the CDS and sell them.

To answer your questions,
1) After the XR date, the price of both Seylan bank stocks will drop due to a dilution effect from the rights. This is because there will be an increased number of shares in the market which will re-adjust valuations such as EPS, Yields, NAV, and so on.

2) Well as the dilution effect is due to the additional shares, the investor does lose out initially by not subscribing to the new shares. However, at 75rs and 35rs... it does come down to your position a) on the stock, and b) your own financial position. Subscribing to the rights if your purchase price is above 75 will reduce your average and increase your quantity. Selling your rights will be a quick cash injection but you will lose out on capital gains in the future when/if the stock appreciates.

3) Expect the dates out soon, only a preliminary announcement has been made.

4) Seyb.n was trading below 75rs for a week or so last week. If you owned the stock previously, you could have picked up the rights you were willing to purchase off the market and then sold the rights when you were entitled to.... does that makes any sense? Smile

. The stock is fundamentally sound, and has quite the turn around story. Its reasonably priced and has reached previous highs of 120rs (voting) and 60rs (non-voting). Plus their annual reports for the last two years are a great read! That's my not too complicated monkey's analysis of it...

Hope it helps.