If you have an open trade on a company that announces a rights issue, then we’ll create a new position on your account that allows you take advantage of the offer. The position will be called ‘[company name] – rights issue’, and will be opened on the ex-date as a separate position at an opening level of zero. The size of the position will reflect the terms of the issue.
The only exception to this scenario is if it is a euro-listed issue, in which case we’ll still open the new position, but the rights will be booked on to your account on a 'one right for one share' basis. Then when the rights are converted into ordinary shares, we’ll adjust the size of your new position according to the conversion ratio dictated in the terms of the issue.
If your original position was long, you’ll have three options:
- Trade out of the rights by calling our dealing desk during trading hours
- Take the rights up by emailing or calling our helpdesk or corporate actions team prior to the deadline
- Do nothing and let the rights lapse (in the majority of cases this is the default option)
If your original position was short, you can either buy the rights back, or leave the new position to expire. If you leave the position, though, you’ll be at risk of being ‘taken up against’ – meaning the rights will automatically be taken up, and you will short the shares at the subscription price.
Rights issue example
A company you have a long position on offers a rights issue, allowing you to buy five shares at 20p for every one share you already own. On the ex-date, your position is equivalent to owning ten shares.
We’ll open a new position worth 50 shares, leaving your original position unaffected. If you decide to take up the offer, you’ll get 50 new shares at a level of 20p per share.