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Question about settlement date


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A stock is having a rights offering and the record date is July 6th.

Let's say I buy the stock on July 6th. Will I be able to participate in the rights offer or Will it settle t+2 and I won't get the rights?




The stock is not officially yours until the settlement date even though it will appear in your account. Settlement date is what makes it final. You generally need to purchase the stock a few days before the record date to ensure that it's settled on the record date to be entitled to the spin-off.


I think about it with dividends when running through these exercises. The general set-up of dates is as follows.


1) Ex-div date: T-2

2) Record Date: T

3) Payment Date: Not important


The reason the ex-div date for most dividends is T-2 is because stocks generally settle 3 days after purchase. If you didn't purchase the stock the day before the ex-div, you don't have the three days for the final settlement to be entitled to the dividend, so everyone who purchases at T-2 or after doesn't get the dividend and the stock price is lower to reflect that.


The dates should generally be announced though as you will find situations that don't match this "template" exactly; however, I would think you'd have to have purchased the stock already. Also, I don't know what stock it is, but these dates are affected by the holidays in Canada and U.S. if you're buying one of those jurisdictions so you might have had to purchase it back in June to be entitled to the spin-off.





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