For index-tracking ETFs, what happens when one of the index constituents has a rights issue? Do the ETFs subscribe to the rights issue, do they ignore the rights, or do they sell the rights? If they do subscribe, where do they get the cash to do so? If they sell the rights, what do they do with the resulting cash?
In particular, I am interested in the behavior of these two index ETFs:
- SPDR S&P 500 ETF Trust (NYSE Arca: SPY)
- SPDR Straits Times Index ETF (Singapore Exchange: ES3)