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Corporate action events

RHTS: Rights Issue/Subscription Rights/Rights Offer

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RHTS announces a rights issue as a single event: holders are given rights to subscribe for new securities and decide, in the same event, whether to exercise, sell or let them lapse. It is mandatory with choice; holders who do not instruct usually see their rights lapse.

Code
RHTS
Usually announced as
CHOS

What RHTS means

In a rights issue the company offers new shares to its existing holders in proportion to their holding, at a subscription price below the market. The right to subscribe is itself an intermediate security. RHTS covers both steps in one event: the distribution of the rights and the subscription.

Many markets instead announce rights as two linked events: RHDI for the distribution of the rights and EXRI for the exercise. RHTS is used where the market treats the offer as one event; ASX, for example, announces entitlement offers as RHTS with CHOS and the options EXER (exercise), LAPS (lapse) and OVER (oversubscribe).

Other option codes that can appear on a rights event in MT564 are SLLE (sell the rights) and BUYA (buy additional rights to round up), depending on what the account servicer offers. Renounceable rights, which can be sold, are flagged with :22F::SELL//RENO.

When you see it

  • In an MT564 with CHOS, the ratio, the subscription price (:90a::PRPP), a subscription period (:69a::PWAL), a response deadline (:98a::RDDT) and a market deadline (:98a::MKDT), often with an MT568 for the prospectus details.
  • RHTS vs EXRI: EXRI is only the exercise step, on the rights ISIN, after a separate RHDI. RHTS vs PRIO: a priority issue usually gives no tradable right. RHTS vs BONU: bonus shares are free; rights shares must be paid for.

What to do next

  • Get each beneficial owner’s decision: exercise, sell, oversubscribe or lapse. Send an MT565 per account before the account servicer’s response deadline, with cash available for the subscription.
  • Without an instruction the default applies, which for rights is usually LAPS: the rights expire and their value is lost unless the issuer sells lapsed rights for the holders. Flag lapsing positions to portfolio managers early.
  • On the MT566, reconcile the cash debit (number exercised times the price), the credit of new shares, any refund on oversubscription and any cash from sold rights. Track the instruction status in the MT567.

Where it appears in MT and ISO 20022

MT (ISO 15022)

  • MT564 sequence A (GENL), :22F::CAEV//RHTS with :22F::CAMV//CHOS; options such as :22F::CAOP//EXER, //LAPS, //OVER, //SLLE
  • MT564 sequence C (INTSEC) for the intermediate security; sequence D, :22F::SELL//RENO or //NREN
  • MT565, MT566 and MT567 sequence A, :22F::CAEV//RHTS

MX (ISO 20022)

  • seev.031 CorpActnGnlInf/EvtTp/Cd = RHTS (checked in seev.031.001.15), with the flag in CorpActnGnlInf/MndtryVlntryEvtTp/Cd
  • The same CorpActnGnlInf/EvtTp/Cd = RHTS appears in seev.033 (instruction) and seev.036 (movement confirmation)
  • The rights are described in IntrmdtScty of seev.031 (0..1)

Questions

What is the difference between RHTS, RHDI and EXRI?
RHTS handles a rights issue in one event. Markets that split it use RHDI to distribute the rights (mandatory, no choice) and EXRI to exercise them (with a choice to exercise, sell or lapse) on the rights ISIN.
What happens if I do not instruct on a rights issue?
The default option applies, which is normally lapse: the rights expire. In some markets lapsed rights are sold for the holders and the proceeds paid out, but you cannot count on it. Instruct before the response deadline.
What do RENO and NREN mean on a rights issue?
They come from :22F::SELL in sequence D of the MT564. RENO means renounceable: the rights can be sold. NREN means non-renounceable: the rights cannot be sold, only exercised or left to lapse.