I am entitled to STOCK RIGHTS, what is this?

sotck rights

Kabayan,,

I received a notice via email, entitled daw ako sa STOCK RIGHTS, wow ano yun? The first thing I do if something is new to my knowledge, I research. Thank you Google. Here’s what I found out that I want to share with you.

Stock Rights are offers that allow existing stockholders to buy additional shares at a predetermined price, for a set time period.

Ibig sabihin, dahil ako pala ay stockholder na ng isang kompanya, inooffer-an ako na bumili ng additional shares, sa presyong mas mababa sa market, pero may deadline to avail.

Tanong, is it a good deal? Let’s do some simple computation.

Stock Rights offer price: Php 2
Stock Rights offer share: 1 per 2 shares being held (Ex. if you own 100 shares you can buy 50 shares at Php 2 )
Additional Investment: Php 100 (P2 x 50 shares)
Stock Market current price: Php 5 x 50 shares = Php 250
Gain on current market price (Php 250-Php 100)= Php 150 (instant paper gain on shares availed)

(Note: Different computations apply for the computation of your total investment. Illustration above is for the stock rights purchase only. )

Based on computation above, it appears this is a good deal because you have bought a stock at discounted price. But WHY would some companies offer a stock rights? Di ba sila malulugi?

Companies offer stock rights to raise additional capital, for business expansion. Sometimes, it is better to tap existing stockholders because they already hold interest from the company.

This is a normal business strategy, and a healthy way of raising capital.

As stock holder, you may opt not to avail and let it expire. Just ignore the notices.

Just be sure though, that the company you are in is a company that you trust and you believe can provide long term growth for your money. You may also evaluate where would the additional capital being raised from stock rights offer will be used.

Regards,

The Cristobal

If you have not started in stock market investing, here’s how.

How to Invest in Stock

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