Stock Market terms

Stock market has it own terms and activities. This will provide further information about the frequently used terms and key activities in Colombo stock exchange announcements and reports.

Rights issues

When a company listed in the share market further wants to expand the capital it may issue rights.

Unlike an Initial Public Offer (IPO) rights are issued only for the current shareholders of the company. The price of the Rights is determined by the company considering current market price. However the approval of the shareholders is required. Usually the price is higher than the IPO but still lower than the current market price. They are issued proportionately to existing shares owned by the shareholders. By issuing rights the company can raise capital easily without borrowing money for higher interest.

Rights issue information is available in the CSE Daily and Weekly repots in the following format

Company	Proportion	EGM / Prov. Allotment	XR From	Despatch Of Prov.  Letter Of Allot.	Renunciation	Last Date Of Acceptance & Payment	Trading  Of Rights Commences On
AAA	01 for 04	12-08-2011	13-08-2011	19-08-2011	02-09-2011	03-09-2011	25-08-2011
Name of the company	One right for each 4 shares	Date of the Emergency general meeting	Ex-Rights/ Shareholders who purchase shares on this date and after will not get rights	Sending the allotment letter for your acceptance		Last Date Of Acceptance & Payment	You can start trading your rights from this date

Rights are not mandatory for the shareholders. If a shareholder feels he doesn’t need he can simply refuse the offer by informing the company. (If you do not return the duly completed allotment acceptance form, it is regarded as “declined”)

If you do not wish to purchase rights but still want to give it to someone that could also be done.

XR 

To be entitled for rights you should keep your shares until the XR date. If you sell your shares day before the XR you are not entitled for rights. Similarly if you purchase on XR date or after you are not entitled for rights.

Benefits to shareholders

Can purchase share at a price lower than the current market price

Can commence trading before payment