Abu Dhabi bourse introduces rights issue

The  Abu Dhabi Securities Exchange (ADX) on Monday started applying Rights Issue trading. 

Eshraq Properties, listed on the exchange under the ticker symbol 'Eshraq', received ADX approval for a capital increase through a rights issue in the amount of Dh600 million. The increase, representing 34.78 per cent, will be converted into 600 million shares at a par value Dh1 per share.

Rights issue allows a shareholder who does not want to, or cannot, subscribe to the share increase, to sell his rights for financial benefit.

The UAE capital markets regulator, Securities and Commodities Authority (SCA), approved earlier last year the regulation concerning trading in rights issues on the UAE financial markets.

A rights issue is considered an invitation to existing shareholders to purchase additional shares in the company at a discounted market price.

Companies use rights issues to raise capital. In certain cases, companies will have their Rights Issue underwritten by an investment bank for reassurance that it will raise the finances.

A Rights Issue is an addition to the markets and will further boost trading, thus increasing investment flows and institutional participation. It will also help increase liquidity and provide shareholders of public joint stock companies the opportunity to achieve returns on their rights issue without participating in it.





 

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