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What You Must Do With Your Sembcorp Marine Rights

Stocks

Written by:

Alvin Chow

P.S. if you are here for information on Sembcorp Marine’s 2021 Rights Issue, here’s the latest update.

The Sembcorp Marine rights will be trading on SGX today (19 Aug 2020).

There are at least 3 options you can consider. Regardless which you choose, you MUST ACT.

Please don’t repeat the SIA renounceable rights and MCBs episode previously.

If you need more information, you can refer to this where we explained what Sembcorp Marine and Sembcorp Industries wanted to do. Here’re the relevant documents from Sembcorp Marine about the offer.

To make it easier for you, these are your possible options:

Option 1: Sell

These are renounceable rights which means they will be traded on SGX. You can choose to sell them instead of paying to convert them to shares.

My guess is that the initial price would be close to $0.02 since Sembcorp Marine closed at $0.22 and the conversion price is $0.20 for each right. But of course the prices are subjected to changes due to market forces and perceptions.

Update 20 Aug 2020: Given that the rights are trading at $0.002, it might not make sense to sell if you have too little rights because you have to pay minimum commission. For example, the proceeds would be $20 after selling 10,000 rights. But commission can be $25 for the transaction. You end up worse off.

How many rights will you have?

You get 5 rights for every share you own. Simply multiply the Number of Share you own by 5 to get the number of rights you have.

You can also login to your CDP account or refer to your broker’s letter (if you held the shares in a custodian account) to confirm the number.

Who should consider selling?

You should sell if you have NO intention to subscribe the rights.

At least you get back some cash. Don’t let it expire.

You have until 27 August 2020 at 5.00 pm to sell them and after which the counter will be delisted. The counter is Sembcorp Marine R (SGX:THFR).

Option 2: Subscribe

You can also subscribe by paying $0.20 to convert each right to a share in Sembcorp Marine.

If you have 1,000 shares, you would be granted 5,000 rights. You can pay $1,000 to convert the rights to shares and you will end up with a total of 6,000 shares.

If you wish to subscribe, make sure you do so within the time period!

You can pay for the conversion at the ATMs (shares held in CDP) or transfer to your broker (shares held in custodian).

The acceptance of the payments and applications starts from 19 Aug 2020, 9am and ends on 2 Sep 2020, 5pm.

Option 3: Subscribe to partial rights and sell remainder

The last option is that you can subscribe to fewer rights than you were entitled.

For e.g., you have 5,000 rights but only wish to subscribe to 2,000 rights. You can pay for the 2,000 rights ($400), and SELL the remaining 3,000 rights that you want to give up.

You’ll need to take 2 actions:

  1. SELL the rights which you don’t wish to convert and,
  2. PAY for the partial rights you want to convert within the stipulated dates.

I recommend you to do both at the same time in case you forget to do one and not the other.

Option 4: Subscribe to MORE rights

You can also subscribe to more rights than what you were given.

To do so, you can either:

  • BALLOT for excess rights by paying for more rights during the application, or
  • BUY more Sembcorp Marine R (SGX:THFR) from the stock market.

The advantage of the former is that you don’t need to pay additional fees (above the $0.20 conversion) for the excess rights. But it is a ballot so it isn’t guaranteed you get what you applied for.

The advantage of buying the rights from the stock market is that you would definitely get the excess rights and can convert them to shares. The downside is that you have to pay extra in this process.

Important: Please Act

The worst thing you can do in this exercise is to do nothing.

You should either sell the rights or pay for them to convert to shares.

Last Warning: The rights will stop trading on 27 Aug 2020, 5pm and the last date to pay for conversion would be 2 Sep 2020, 5pm.

Decide now and act!

39 thoughts on “What You Must Do With Your Sembcorp Marine Rights”

  1. with today rights price, selling mean paying instead of receiving because of commission.
    so no act may be better than sell.

    Reply
  2. Hi Alvin, I have THFR shares (6500) which approx worth only $19.5 (consider market value $0.003). Does sell this stock require commission fee? (If used UOB kayhian brokerage account which normally commission fee more than $20+)
    So do you think still worth to sell it?
    Or subscribe it (pay additional) and ‘hope’ sembcorp marine company can get better?

    Reply
  3. Hi Alvin, may I know how differently investors handle in terms of the procedures if those shares were being purchased via CPF or SRS in the first place? Can they still use CPF/SRS funds to subscribe rights or must be done in cash mode? Thank you.

    Reply
  4. Hi Alvin,
    I just received the notice. I have 90,000 shares which is 450,000 rights, I want to sell the rights, pls advise how to sell?

    Reply
  5. Hi Alvin,
    After subscribed to the rights, when will it become actual SCM share that I can trade? (The actual scm shares, not the rights)

    Reply
  6. Actually what is the difference between having the rights to buy now or after ex-rights?
    The price of Sembcorp Marine is already almost $0.20, which is the same as the “discounted” rights price of $0.20. After ex-rights, if price drops to below $0.20, it will be a nightmare for investors.
    So what benefits or “rights” to buy are we talking about?

    Reply
    • I am a SCM shareholder myself and won’t be subscribing to the rights out of concern that it may become a case of throwing in good money after bad money. I also share your concern that SCM share price may drop below $0.20 as I am worry that there may be a wave of sell-down by SCI shareholders who receive SCM shares FOC (4.xx SCM shares for 1 SCI share).

      But should I wish to acquire more SCM shares to reduce the dilution to my original SCM shares, I would wait until the SCI shareholders have received their free SCM shares and started trading before making my move. The risk is of course SCM share price may rise instead of drop but it is a scenario that I feel is unlikely to happen given the huge quantity of SCM shares available for trading then. But don’t just take my word for it since I did make a (big) mistake of paying a high price for SCM shares and was not decisive enough to cut loss early 🙁

      Reply
  7. Hi Alvin,

    If we do nothing, will we still be holding the original shares in SMM?

    As an example, if I have 1000 shares of S51, and I chose not to do anything, will I still retain the 1000 shares post- rights?

    Thanks

    Reply
  8. So what happens if we don’t sell the rights (due to commission exceeding sale) and also don’t subscribe to the rights (don’t want to invest further in a sinking ship)? SCM’s underwriter will take it back and sell to Temasek?

    Reply

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