New selling and pricing mechanism for rights issues to be implemented

30/03/2015 06:36 AST

The Qatar Stock Exchange (QSE) is all set to see new selling and pricing mechanism of the rights issue as part of modernising the financial framework to offer flexibility and protection to shareholders.

The rights-holder will have the option either to exercise the rights by subscribing in the company’s capital increase, or sell the rights, fully or partially, in the market under the conditions and within the period specified in the Qatar Financial Market Authority (QFMA) regulations as well as in the market notice, a QSE spokesman said in a communiqué.

The bourse is working closely with the QFMA and Qatar Central Securities Depository Company to put in place the selling and pricing mechanism of the rights issue as a new financial instrument in the market, in light of the QFMA regulations in this regard and the trading rules of the exchange.

Consultations are on-going between the three parties to define the mechanisms in implementation of Article (7a) of the QFMA’s regulations with the aim of providing protection and flexibility to those shareholders who receive the rights to subscribe in the listed company’s capital increase.

Rights issues are securities that entitle their holder the right to subscribe in the capital increase issued by the company and dedicated to its existing shareholders.

According to the new QFMA’s regulations, rights issues can be listed and sold at the stock exchange. The number of rights issues will be equal to the number of shares in the capital increase to be issued by the company to its existing shareholders through the subscription process.

Additionally, the QSE said the computation of the right’s theoretical price depends on the underlying share’s price, and it has an expiry date after which the rights lapse and become with no value, unless they are used in the subscription of the company’s capital increase. The QSE, which is keen to raise awareness among investors, will launch a campaign to introduce this new investment tool and provide investors with all supporting information needed to enable them making the decision.

Through adding the rights to the investment portfolios of the eligible shareholders, the right issues selling rules and mechanism aim at compensating the eligible shareholders for the decline in the value of their investment portfolios resulting from the decline in the price of the share when traded on the X-right date (the day following the deadline specified by the company’s extraordinary general assembly for holding the share to be eligible to participate in the subscription of the company’s capital increase).

Gulf Times