Companies use rights issues to raise more capital for reasons such as strategic expansions, to pay off debts or to buy out other companies. To raise the additional capital, a company invites existing shareholders to buy a specific number of new company shares at a discount.
NIC bank is inviting shareholders to buy 1 new share for every 4 they already own at discount price of KES 21 per share compared to the current market price of KES 38.75 per share (Monday 30th July). NIC shareholders will have the option to either take up their rights to buy the cheaper shares, or sell their entitlement (rights) to other interested NIC shareholders at the Nairobi Securities Exchange.
In a rights issue, the buying and selling of such entitlements or ‘rights’ to buy new and cheaper shares in a company based on a ratio of current share ownership in that company usually happens during a specific period which in the case of NIC will be from August 27th to September 14th this year. Thereafter, any NIC rights held will have to be honored by the holder of such rights, by buying the new NIC shares in the stipulated ratio of 1 new share for every 4 already owned and at KES 21 per share.
Through this, NIC will raise the capital it requires to further its expansion. In total, NIC is targeting to raise 2.07 billion shillings to finance its local and regional expansion by issuing 98,724,391 new shares which will be fully listed on the Nairobi Securities Exchange on October 23rd this year. Read more on the rights issue here.
Below is the timetable on the NIC Rights Issue showing key dates and explaining the corresponding activities on those days:
| DATE | ACTIVITY | DESCRIPTION |
|
Monday July 30th |
Record Date | Yesterday, the NIC shareholders eligible for the rights issue were determined. These shareholders will be entitled to buy 1 new ordinary NIC share for every 4 already held at an 84 percent discount (based on the market value of current NIC shares on Monday 30th July) |
|
Friday August 10th |
Distribution of Information Memorandum and PALs to Eligible Shareholders |
NIC shareholders determined to be eligible for the rights issue will receive an Information Memorandum with details on the rights issue and Provisional Allotment Letters (PALs) which will give them official ownership of the rights issued to them. |
|
Monday August 27th |
Commencement of Trading in Rights on the NSE | On this day the 98,724,391 new NIC rights will begin trading at the Nairobi Stock Exchange. |
| Friday August 31st | Last Date for immobilization of Rights |
By this date, all NIC shareholders with rights issued to them will have to choose whether to take up their rights by buying the new discount shares in the proportion of 1 new share for every 4 they already own, or sell their rights to other parties. |
|
Friday August 31st |
Last Date for renunciation (by way of private transfer) |
This will be the last day for NIC shareholders intending to transfer their rights to parties closely affiliated with them (family, business partners etc) to do so. |
|
Friday Sept 7th |
Last Date for trading in Rights |
This will be that final day of trading for the NIC rights sold by the shareholders who did not wish to take them up and instead sold them at the NSE. |
|
Friday Sept 14th |
Closing Date |
Between September 7th and this date, holders of NIC rights will be allowed time to apply and pay for the uptake of their new shares at the NIC Rights Issue offer price of KES 21 per share. |
|
Mon Sept 24th |
Final Date for payment of New Shares to Receiving Bank for applications against Irrevocable Bank Guarantees |
This will be the final due date for bank payments towards newly assigned NIC shares for those shareholders using irrevocable bank guarantees to pay for their new shares. The Irrevocable Bank Guarantee allows approved banks to pay for an investor’s shares once they have been approved and allotted to the investor rather than before to avoid cheque refunds in the event that the investor has applied for too many shares than he is entitled to; a common occurrence in rights issues. |
|
Friday October 11th |
Announcement of Offer Results |
The total capital NIC raises through the rights issue will be announced on this day, in addition to the number of new shares subscribed to and other details. |
|
Tuesday October 15th |
Final Date for payment of New Shares to Receiving Bank for applications against Letter of Undertaking |
This will be the final due date for payments towards newly allocated NIC shares to those investors using Letters of Undertaking to prompt their banks to pay for their new NIC shares. A Letter of Undertaking in this case will prompt the bank to meet’s an investor’s payment obligation for new NIC shares once these shares have been allocated to the investor. |
|
Friday October 19th |
Electronic crediting of CDS accounts |
The Central Depository System (CDS) is an electronic system that facilitates holding of shares in electronic accounts and is operated by the Central Depository & Settlement Corporation. Shareholder accounts will be electronically credited with their new NIC shares in proportion to the rights they took up for these shares. |
|
Tuesday October 23rd |
Dispatch of payment of Refunds through Electronic Funds Transfer or Refund Cheques |
Refunds for new NIC shares subscribed to and paid for but not allotted to investors will be paid back via cheque or electronically. |
| Tuesday October 23rd | Listing and Commencement of Trading at the NSE. |
Newly issued NIC shares will begin trading at the Nairobi Securities Exchange at the prevailing market price of existing NIC shares. |