Stock Trading Price During Rights Offering

[Packer16]

I have a situation where a rights offering is taking place at a price below the current trading price (including rights).  What has been your experience after the rights have been issued?  Has the price approached the rights offering price?  TIA.

 

Packer

[greenwave]

Packer ..

 

This is from my "sometimes reliable memory ". As I recall from several years ago , when I participated fully ,…pro-rata …in the rights offering of a commercial REIT (FUR) ; I was soon disappointed that I paid the "rights offering price" for the stock  to protect myself from dilution....(because I was later able to buy all I wanted at less than the rights price ) .

 

Almost immediately after the offering was announced , the stock became more volatile . I believe the significant holders & underwriters likely took full advantage of their well planned  "rights strategy", which obviously included advance  negotiated  over-allotment privileges for themselves. Daily volume also increased notably during the rights time frame . I feel sure in this case the major holders did well .

 

Although the price of the  common shares dropped below the rights price for several weeks or more , I was also able to add to my position (at maybe 10 to 15 % below the rights price),... on the open market to hedge the dilution problem.

 

Again from my vague memory, I think the company used the rights strategy a second time  with the same pattern and the same effect. 

 

On the positive side , they did ,...I think ,...put the new capital to productive use in acquiring good real estate at discounted prices.

 

I have since sold out of my position at an overall small capital gain profit , along with the decent dividend I was paid  . My appetite for REITS  in general has since diminished .

 

Thank you Packer for your very continuous positive contribution to this great forum . I am one of your  students for sure. 

 

greenwave

 

[rayfinkle]

In a recent offering I participated in I witnessed:

1) An initial decline in price when the stock traded "ex rights"

2) Post offering, the price trade near the "expected value" of the offering (pre-offering shares x pre-offering price + offered shares x offered price) / (pre-offering shares + offered shares)

3) Since then the stock has traded up... though I don't necessarily attribute that to the offering