Fisher & Paykel Rights Issue Calculator

Fisher & Paykel Appliances (FPA) have recently announced a capital raising involving both an issue of shares to a strategic partner (Haier) as well as a fully underwritten renounceable rights issue. When calculating the value of the right, it is important to note that there are three stages to the capital raising. First there will be a placement to Haier at 80 cents per share. This is followed by a 1-for-1 rights issue, with Haier’s placement shares also being eligible to participate in the rights offer. Finally there will be an additional ‘Top-up’ placement to Haier to bring their holding to 20% of outstanding shares. With the shares currently trading at 2.5 times the rights issue price, I assume there will be a strong take up of the rights offer, and for people not wanting to take the offer up there will be strong trading in the rights. Haier is a sub-underwriter for the rights offer, which given a strong uptake of the rights offer, this will be inconsequential to the calculations. Upon the completion of all three capital raising events, the number of shares outstanding will have increased from 290 million to 726 million. The following are my calculations of the capital raising:

Shares Share price Equity Raised
(Millions) ($Millions)
Original 290.38
Haier Placement 58.08 0.80 46.46
Rights Issue 348.45 0.41 142.86
Top-up Placement 29.04 0.41 11.91
Total 725.94 201.23

Similar to my Nuplex rights-issue calculator I have created a calculator to assist with calculating the value of the right and the ex-right share price. It works on the basis that the wealth of a share-holder doesn’t change on the record date (4th June 2009); the shares and the rights just begin trading separately. Please note that the default price is based on the closing FPA share-price on 27 May 2009.

Please enter cum-rights share-price:  cents.
Issue price: 41 cents
Value of right: 0
Ex-rights share price: 0

Disclosure: I am not currently a share-holder or a previous share-holder of FPA.

9 thoughts on “Fisher & Paykel Rights Issue Calculator”

  1. Hi, thank you for your most clever calculator. Just wondering, you know how NPX is currently trying to “consolidate” their shares so 4 current shares become 1 share. Whats the logic behind this and how come this caused the price to drop so suddenly ?

    [Reply]

    Kelvin Hartnall Reply:

    Hi Andrew. When a company does a share-split or a reverse-share-split, it doesn’t change any of the investors ownership in the firm – it just changes the number of shares and how much each share is worth. Warren Buffett doesn’t believe in stock-splits and has never split the Berkshire-Hathaway shares (they are currently trading for just over US$90,000 per share). However, a number of companies do stock-splits or reverse-stock-splits to keep their shares trading within a particular range, and I’m guessing that this is why Nuplex is doing the reverse-stock-split to bring the share into a normal range for the NZ markets. Sometimes investors see stock-splits as a signal from directors as to the future for the firm, so it would be possible to read into this move a pessimism from directors that Nuplex will get above $1 by itself. I haven’t read anything into the move other than bringing the share above $1. As to why 4 for 1, I’m actually surprised that they didn’t choose to do a 8 for 1 which could be justified in bringing the number of shares outstanding back to the current level before the capital raising.

    [Reply]

  2. WOW, your brilliant calculator worked perfectly on FPA again ! The ex right price for FPA was EXACTLY 71.5c !!! One clever kiwi you are~~ !! Do you do shares yourself ?

    [Reply]

  3. Hi Kelvin .. Now that the FPA shares are trading at ~ $0.70 cents and rghts at 0.30 cents, the share price of FPA based on current price post rights issue (i.e. 23rd June) will be around $1.00???

    [Reply]

  4. Hi Kelvin: Just wondered why my calculation is different from yours … my new price is 69 cents=(290.38*$1.03+$201.23)/725.94. Is it because of the number of digits I have used are less than yours?

    [Reply]

    Kelvin Hartnall Reply:

    The logic behind my calculation uses a different perspective. The dilution that occurs to current shareholders by the placements to Haier are already agreed to and therefore the share price before the rights issue has already priced this dilution in. So the alternative perspective is as follows:

    If I purchased a share today and then received and exercised the right, then my total outlay would be $1.03 + $0.41 = $1.44 and I would end up with 2 shares. Therefore I have paid $0.72 per share. Since all other information is already priced into the pre-right share price, the ex-right share price should be $0.72.

    [Reply]

  5. Hi Kelvin: Thank you very much for your reply! Now I understood that our only difference is that I assume the closing price on 27 May didn’t reflect the fact the Haier will inject their initial replacement at a price of $.80 later on 2 June.
    Therefore I turned to check the ex-rights price. However, FPA price on 5 June (one day after the record date) was $.69, according to the data I drew from the NZX Archive.
    So I have got another question: Did 5 June the ex-rights date? I am not sure if it was because for a dividend payment event the ex-dividends date should be 29 May.

    [Reply]

    Celine_tl Reply:

    Hi Kelvin again: The first price on 5 June was $0.75 and the last one was $0.69. So the average is $0.72!

    [Reply]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe without commenting