As we at PesaTalk had alluded to earlier, Standard Chartered Bank has announced that it plans to carry out a rights issue and increase its authorised share capital. In a letter addressed to the Chief Executive of the Nairobi Securities Exchange the bank announced that its Board of Directors had approved a rights issue subject to shareholder and regulatory approval. At an AGM to be held on the 24th of May shareholders will be given the opportunity to decide on the matter.
A rights issue is an issue of additional shares by a company to raise additional capital. The current shareholders (prior to the rights issue) are given a chance to buy additional shares, proportionate to their shareholding in the company prior to the rights issue. The idea is to ensure that shareholders have the opportunity to maintain their exact same position in shareholding, so that no one buys the entire company or anything like that at the expense of everyone else.
This would be the second rights issue of the year coming after the much publicised Kenya Airways rights issue. Other listed companies such as NIC Bank and Diamond Trust Bank are expected to turn to the NSE for additional capital through rights issues in the course of the year.