Open offer is when company allows shareholders to purchase a stock at a price that is usually is lower than the current market price to raise cash for the company.
How do I take part in an open offer?
If you would like to participate in an open offer, you’d first have to qualify by holding a shares position in the company at the close of business the day before the ex-date.
For qualifying shareholders, we’ll open an untradeable separate position on your behalf. It’ll have an opening level of zero, and will be called ‘[company name] – open offer’ and our corporate actions team will send you an email notification containing the terms of the rights issue, important dates and available options.
This information will also show on My IG within the ‘corporate actions’ section of the ‘live accounts’ tab, where you’ll be able to make your election.
How does an open offer affect my CFD account?
If you have a non-guaranteed stop on your original position, then we’ll amend this stop to reflect the terms of the open offer and any dilution in price.
If you have a guaranteed stop attached to your position, then you’ll have no choice but to automatically take up the offer. This is to ensure your exposure and monetary risk remain the same, and also to take on board any price dilution in the stock.
Your original position will then be closed out on the morning of the ex-date at the level at which the stock closed on the previous business day, and a new position will be opened on your account at an increased size (the equivalent of buying more shares) to reflect you taking up the new offer.
What if I have a short position?
If you sold to open your initial trade, you’ll still see the new position on your account – but you’ll have no option to take up the offer. Additionally, you’ll be at risk of being ‘taken up against’ if other traders with a long position choose to buy more shares. This means that the new position will be automatically incorporated into your original short position at the subscription price, giving you greater exposure.
Your opening level will be adjusted using the previous closing price of the stock to give a theoretical opening level. Any stops and limits will be adjusted to maintain the same monetary risk as your initial position.
Please note: This information is intended as a generic example, and subject to change at any point. It may not apply in every scenario.