QUERY on Rights issue : In march 2024 Scanpoint geo withdraw rights saying 90% issue did not subscribe wherein today SILGO retail allotted share with just 80.10% subscription .
it indicate that it is PREROGATIVE of company to retain the subscription or revoke the rights issue itself if not subscribed minimum 90% ? @ShubhS9
I wasn’t able to find the exact circular, but as per this news:
The mandatory 90% minimum subscription would not be applicable to those issuers where object of the issue involves financing other than financing of capital expenditure for a project, provided that the promoters and promoter group of the issuer undertake to subscribe fully to their portion of rights entitlement.
From Scanpoint’s Letter of Offer:
Our Promoters and members of the Promoter Group vide their respective letters dated November 28, 2023 have given their intention to partially subscribe towards their portion of rights entitlements. Therefore, the minimum subscription criteria provided in regulation 86(1)(b) of the SEBI ICDR Regulations is applicable to the present Rights Issue.
From SILGO’s Letter of Offer:
The objects of the Issue involve (i) Repayment in full of unsecured loan availed from one of the Promoters, Mr. Nitin Jain; (ii) Repayment/ Pre-payment of certain secured loan availed from lenders of the Company either in part or full; (iii) To augment the existing and incremental working capital requirement of our Company and (iv) General corporate purposes.
Our Promoters and member of our Promoter Group have, vide their letters dated December 25, 2023 (the “Subscription Letters”) undertaken to subscribe, jointly and/ or severally to the full extent of their Rights Entitlement and subscribe to the full extent of any Rights Entitlement that may be renounced in their favour by any other Promoters or member(s) of the Promoter Group of our Company.
Accordingly, in terms of Regulation 86 of the SEBI ICDR Regulations, the requirement of minimum subscription is not applicable to the Issue.
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MEANS RE carry 2 risk mainly (1) if you fail to apply (2) rights issue fail . in both cases RE turn zero .
It appears that the lack of undertaking from the promoters to fully subscribe for the rights is a big red flag 
, irrespective of the purpose for which the money is raised. Why wouldn’t the promoters want to increase their stake in the company.
There is always a chance of under-subscription in such cases and the rights can get withdrawn.
I didn’t know that REs carried this risk.
Shareholders who are entitled to RE won’t loose much if the rights are withdrawn later, as they haven’t paid anything out of their pocket for such RE.
The risk is only for those ppl who buy REs from the market in the hope of subscribing for the rights, as they pay money to acquire the RE and will end up loosing that money, if the rights get withdrawn later.
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These shareholder too will lose on regulatory adjusted market price being CUM RIGHTS -EX RIGHT .
Hi, i didn’t think of this.
I understand the concept of shares turning Ex-rights after the record date etc.
But shouldn’t it be restored back to earlier market price (Cum-rights) if the rights eventually get withdrawn later.
The shares turn ex-rights because the new rights shares are issued at a discount, but if no such issue takes place, why would the shares trade at Ex-rights.
Maybe in the short period between record date and the rights cancellation date, the share might trade at Ex-rights due to regulatory action, but once the news of cancellation arrives, shouldn’t the price/regulatory adjustment be restored to the Cum-rights price ?
When rights issue never happened, why should the share price get affected.
Would like to hear your thoughts on this.
Scanpoint geo EX rights 16.02.2024 Rights was from 28.02 to 07.03 , WITHDRAWN 16.03. it will not be practical to bring the ex rights adjusted share price after one month to cum rights level through some regulatory action but only market behavior . moreover withdrawal of rights issue is rare so this has to be , must be an inherent risk .
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