Noble's nil-paid rights can trade till 5pm today

The Singapore Exchange's (SGX) technical glitches and major outage yesterday may well have hit on the worst possible day for Noble Group founder Richard Elman.

The beleaguered commodity trading firm is raising US$500 million (S$673 million) by selling new shares to its existing shareholders through a rights issue, and yesterday was the last day that shareholders could sell those rights.

Mr Elman, who has been selling his rights on the open market, had a much smaller window of opportunity to do so, with trading halted for most of the day.

However, there is a reprieve for Mr Elman and other shareholders as Noble last night announced that trading of the rights will be extended to today.

Mr Elman has agreed to subscribe to 625.9 million shares, or 9.6 per cent of the new shares on offer. His rights entitlement stood at 1.46 billion shares as of June 30.

Since last Friday, Mr Elman has sold a total of 566.9 million "nil-paid" rights, with closing prices ranging from 16.4 cents to 17.4 cents each, according to data on ShareInvestor. Nil-paid refers to the fact that the shares did not cost the issuer, Noble, anything.

That his rights entitlement stood at 889.5 million as of Wednesday suggested he could sell more before trading for the nil-paid rights ended.  

The massive selling has depressed the price of the nil-paid rights, which are trading at a 4.2 per cent discount to the underlying share price after taking into account the subscription cost of 11 cents.

The nil-paid rights, which began trading on June 30, rose 0.1 cent or 2.1 per cent to 4.9 cents yesterday on a volume of 55.9 million units. Noble's shares, meanwhile, dipped 0.1 cent or 0.6 per cent to 16.6 cents.

Under the rights issue, entitled shareholders are offered one rights share for every existing share they already hold, at an issue price of 11 cents for each rights share.

More than 6.5 billion rights shares will be issued in the exercise.

In the light of the trading outage, Noble has extended the trading period for the rights until 5pm today.

The deadline for acceptances, applications and payment for the rights shares, originally set for 5pm on July 20, will also be extended by one day, it said in an announcement last evening.

The rights shares are expected to commence trading on Aug 4.

KGI Fraser Securities trading strategist Nicholas Teo said the trading outage has deprived traders of the opportunity to profit from arbitrage. "The whole market has been looking at this deal, and the outage just complicates things."

Still, Mr Nirgunan Tiruchelvam, director of research at Religare Capital Markets, continues to take a bullish stance on Noble.

"I don't think the trading outage will affect the rights issue. We've already seen lots of trading so far, given that the nil-paid rights are trading at a steep discount to Noble's historical price- to-book value. The response has been favourable," he said.

He added that the rights issue will help Noble bolster its balance sheet amid rallying commodity prices.

Correction Note: An earlier version of this story said that Mr Richard Elman could be intending to sell his remaining rights. This is incorrect as he had committed to buying more than 625.9 million shares from his rights entitlement. We are sorry for the error.

This article was first published on July 15, 2016.
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