2

I am having stock shares in a Swedish company called Nordic Mines, which resolved recently on a rights issue of shares and warrants. Here is what they intend to do in summary: On the record date for the Rights issue, shareholders in the Company will for each share held in the Company receive one (1) Unit right. Three (3) Unit rights entitles to subscription of one (1) Unit, consisting of one (1) share and one (1) warrant. The subscription price is SEK 0.27 per Unit (corresponding to 0.27 SEK for each new share). The warrants are issued without consideration. The warrant gives the right, during 2 April 2018 – 30 April 2018, to subscribe for one (1) share at the lowest of the shares’ quota value at the time the warrant is utilized and 0.27 SEK. Upon full subscription of the Rights issue, Nordic Mines will raise approximately MSEK 51 before issue expenses. The subscription period is 2 – 16 May 2017. Upon full utilization of the warrants in April 2018, Nordic Mines will raise not more than approximately MSEK 51 before issue expenses, assuming a quota value of no more than 0.27 SEK.

I feel I am lost because I don't understand this at all.Let's say I have 9000 shares, how this works? Does this mean I get 3000 rights, and that for each right I should pay 0.27? When can I sell my existing shares (the 3000) and the same time gets the right to participate in this new shares issue? I am asking this question because previously when this company issued new shares, the share price fell to almost zero, so I had to sell them on the record date and then subscribe to the new rights issue since I held the right to participate despite selling my shares. Now what it is going this time is different, because I never heard if terms such as ''warrant'' and ''units'' in the financial context.

Sincerely,

1 Answer 1

1

A warrant is similar to a call option (the right to buy stock at a certain price), with the difference that warrants are filled by the issuing company with new shares, diluting the existing shareholders' ownership.

The language is a bit confusing, but how I interpret it is:

  • For every share you own you can get one "unit right"
  • Three "unit rights" get you one "unit"
  • Each "Unit" gets you one share and one warrant

So your 9,000 shares will get you 3,000 shares and 3,000 warrants (the right to buy shares at a maximum price of 0.27 between April 2, 2018 and April 30, 2018.

I think the phrase "The subscription price is SEK 0.27 per Unit" means that you can buy each unit for 0.27 SKE (which gets you one share and one option to buy another share.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.