Essays on Accelerated Renounceable Pro-Rata Entitlement Offer - TABCORP Case Study

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The paper "Accelerated Renounceable Pro-Rata Entitlement Offer - TABCORP" is a perfect example of a business case study. The accelerated renounceable pro-data entitlement offer is also referred to as transferable or tradable (Ira et al. p.23). They further indicate that these are rights issued to an existing shareholder are transferable on the open market, and are able to be sold separately from the share to other investors during the life of the right. This nature of rights giving grants the issuer fast entré e to capital markets without shortcoming smaller investors. In his journal; Australian Petroleum Production and Exploration Association (APPEA), Healy affirms that pro-rata rights are also known as pre-emptive rights or rights of first refusal or right of the first offer.

Healy states that the right often consent early investors to prevent being diluted in prospect investment rounds. Other definitions that have been used in the journal are the entitlements and Jumbo right. In the traditional of renounceable rights, there are some essential steps, that take place i. e. the adjustment of the stock value on the ex-date; addition of the rights class to the index.

This should be the theoretical Ex-right Price (TERP) in the headline tax less the cost of the subscription. Upon convention of the rights to completely paid ordinary shares, the right lass is drop following a subsequent increment in the headline stock during the last trade price. The rights issue endows with a way of raising new share capital by offering to already existing share capital or through inviting the shareholders to cash subscription for new shares. These new shares are issued in proportion to existing shareholdings i. e.

rights issue on a one for five bases at 250c per share requires that a firm asks existing shareholders to subscribe for a share for every five shares one holds, at a cost of 250c per new share (Michael, p 116). One advantage of the Accelerated renounceable pro-rata entitlement offer that would assist TABCORP is that it is intended to raise more funds quickly than through the use of traditional rights issues. It does not require a prospectus or a statement of product disclosure. Accelerated rights involve the disbursement of securities by an entity through two tranches i. e.

the institutional investor and the retail investor. Issuances of securities to the investors can be completed faster compared to issues to retail investors.

Reference

Hank, G. “Underwriting: What Every Producer Must Know” Oxford: Oxford Centre for Staff Development, 2009.

Healy, Guy. “The Australian Petroleum Production and Exploration Association (APPEA), journal: Volume 46, Issue 1.”Australian 18 Jun. 2008: 21. Print.

Ira W. Lieberman, Christopher D. Kirkness Privatization and emerging equity markets 1998

Kalay, O. Sade, D & Wohl A. ‘Measuring Stock Illiquidity: an Investigation of the Demand and Supply Schedules at the TASE’, Journal of Financial Economics 74, 2004.

Keim, B. & Madhavan, A. ‘The Upstairs Market for Large-block Transactions: Analysis and Measurement of Price Effects’, Review of Financial Studies 9, 1996 pp. 1-36.

Michael J. “The UK financial system: theory and practice.” Cincinnati: South-Western Publishing 1999

Smith, C. ‘Alternative Methods for Raising Capital: Rights versus Underwritten Offerings’, Journal of Financial Economics 6, 1977.

Wruck, K.R. ‘Equity Ownership Concentration and Firm Value: Evidence from Private Equity Financings’, Journal of Financial Economics 23, (1989).

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