What exercising the options will mean for your pocket
Published 18/05/2010 | 05:00
SMALL shareholders in Bank of Ireland will have to spend €825 for every 1,000 shares they own if they want to fully take up their rights to buy new shares as part of a €1.1bn fundraising plan.
The bank said it would give existing shareholders the chance to buy shares for just 55c each as part of the rights issue.
A rights issue is an offer to people who already own shares in a company to buy more shares at a cheaper price than they are trading in the market.
Bank of Ireland has just under 100,000 small investors, with the average shareholder owning 5,000 shares, it said yesterday.
Shareholders will be given the opportunity to buy three new shares for every two they hold.
The Government, through the National Pension Reserve Fund, will separately contribute about €627m to the rights issue. This will bring the total proceeds from the rights issue up to €1.72bn.
With an issue price of 55c, the rights price has been set at a 64pc discount to the closing price last Friday.
A shareholder who owns 1,000 shares will be offered 1,500 shares -- three new shares for every two they own. The cost of taking up these rights for someone with 1,000 shares will be €825 (or 55c multiplied by 1,500 shares).
Someone with a 1,000 shares would have had a stake worth €1,535 based on last Friday's share price.
If they fully take up their rights they will end up in an economic position broadly unchanged at €1,535.
This assumes the shares fall to 94c, which is what the market expects. (This 94c price is the Theoretical Ex-Rights Price. TERP, which is the market capitalisation based on last Friday's closing price, plus the new money to be raised, divided by the total number of shares in issue after the rights issue).
In this case, taking up all your rights will mean writing a cheque for €825 before June 8. There are no other charges.
If someone has 1,000 shares but decides to sell all of their rights, then they will get a cheque for €591 if they return a completed form by May 31. This again assumes the BoI share price falls to 94c. But by selling all their rights, their stake in the bank will be diluted.
Shareholders who want sell all their rights can either ask Computershare to do this for them at a fixed price of €15, or they can ask a stockbroker to do the transaction.
Shareholders also have the option of taking up some of their rights, and allowing the remaining rights to lapse.
Another option is to do nothing and the investment banks helping BoI with the rights issue will try to find investors to acquire your rights.
If these banks, or underwriters, sell the shares for more than the rights issue price of 55c, you will get a cheque for this amount from BoI before June 25.
A letter outlining the various options will be posted to shareholders tomorrow.
More information is available for shareholders in the Republic at 1800 930 490.