SUBSCRIPTION
RIGHTS : TSR
What is the difference between issuing
TSR and a rights offering?
Transferable subscription
right: TSR
A company issues TSRs to all
shareholders when it increases
capital through a rights offering
(RO). Shareholders receive TSRs in
proportion to their shareholding.
For example, a firm could give its
current shareholders the right to
buy 1 new share for every 10 current
shares. Thus, any shareholder hold
10 shares now will receive 1 TSR
according to the rules that 1 TSR
can subscribe for 1 new share.
Basically, when a company announces a capital increase via rights
offering, existing shareholders can choose to subscribe to the capital
increase shares or turn down the offer. Thus, the company may or may
not be able to raise as much funds as desired. However, by issuing
TSRs, the firms seek to overcome the problem, because if shareholders
prefer not to subscribe to the capital increase shares, their rights can
be transferred to others on the SET.
Benefits of TSRs
For the
Company
— Better enables firm to achieve fund-raising target by
setting exercise price of TSR higher than RO price.
— Expands shareholder base.
For
Shareholders
— Provides option of either exercising subscription
rights or selling them.
— Enhances liquidity of the company’s securities.
TSR issuers: listed companies
— TSR term must be clearly specified and must not be over 2 months, with a trading period on
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the exchange of no less than 7 business days and the subscription period of not less than 15
days before the last subscription date.
The exercise ratio must be 1 TSR unit per 1 ordinary or preferred share.
Companies issuing TSRs must not be in the process of delisting its ordinary shares, resolving
such an event, reorganizing its business under bankruptcy laws, or be having its listed
securities suspended from sale or purchase due to causes which seriously affect the rights
and privileges of shareholders.
Can offer TSR within one year starting from when shareholders resolve to increase capital,
without having to ask for SEC approval. The process of issuing TSR can be done without a
financial advisor.
Must clearly specify in written how the company will compensate for TSR holders if it is
unable to provide sufficient newly-issued shares for TSR holders to fully exercise their rights.
Must submit a copy of shareholders’ resolution authorizing capital increase and other
supporting documents, along with report on new shares’ sales results to the SEC.
SET fees is waived for listing TSRs.
TSR trading on the exchange
— TSR will be traded on the Exchange with the stock symbol of the issuing company followed by
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“-T#”, e.g. XXX-T1
TSRs are allowed to be traded on the main, odd lot, and big lot boards.
The ceiling and floor prices are in accordance with the exchange’s rules.
The exchange will post a “suspend trading”, or SP, sign for TSR for three days prior to the
ordinary share subscription and payment date, in order to obtain the name list of TSR holders
who are eligible to subscribe to the newly issued shares.
Issues for consideration
— The issuer should clearly specify details about the capital increase, conditions, offering price,
subscription and payment periods, closing date and board of directors’ resolutions. These
steps will ensure that all relevant procedures are conducted on a timely basis, without confusion.
— The issuer should provide implementation details in the notice calling the shareholders meeting when seeking shareholder approval to issue TSRs, specifying payment methods and that
the total scripless trading system will be used.
— Since TSRs are valid for two months or less, the company should credit the entire amount of
TSR to the scripless system.
Procedures to issue and offer TSRs
Report board of directors’ resolutions to SET.
Hold a shareholder meeting.
Disclose resolutions immediately or no later than 9:00 am.
of the following business day.
Must receive approval to increase capital from at least 3/4
of participated shareholders with voting rights.
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Issuing and offering TSRs
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Offer to those who were shareholders on the closing date
of share registry.
Allocate among existing shareholders in accordance with
their shareholding proportion.
Should offer under scripless system; their period is no
longer than 2 months.
Submit TSR listing to SET
Issuing and offering TSRs do not require permission from
the SEC*.
TSR trading period on SET
Trading on the Exchange is not less than 7 business days
TSR exercise period
An exercise period of not less than 15 days
Report of TSR exercise results.
Report TSR exercise results to the Exchange (using Form 53-5).
Register capital increase with
Ministry of Commerce.
Register the increase in paid-up capital within 14 days
Trade shares from the capital increase on SET
Submit an application to list the shares from the capital
increase to SET
* Note: The issuer must report TSR and share offering results, with supporting documents, to the SEC within 15 days
after the end of the subscription period.
Issues for consideration (continued)
— A TSRs term starts from the TSR issue date, when the Thailand Securities Depository deposits
TSRs into the securities trading accounts of shareholders, and ends on the TSR exercise date.
The entire period must not exceed two months.
— For successful TSR offering and issuance, the firm should educate and enhance understanding
among shareholders. If not, shareholders may not approve the proposed TSR issuance and
offering, consequently affecting the firm’s shares price, or the TSR’s price on the exchange
may not reflect its fundamental value.
— The firm should reach out to shareholders in the scrip system as well. Generally, this shareholder
group may not closely monitor the firm’s news, and as such may lose opportunities to trade
TSRs or exercise their rights. As a result, the firm may not be able to raise funds as planned. If
the firm keeps this group well-informed to decision making, there is a higher chance to achieve
the company’s target.
“TISCO Financial Group issued TSRs and also paid dividends to the shareholders,
allowing shareholders to use such dividends to invest further by subscribing to
capital increase shares equivalent to the dividends in terms of value. Those who
were unable to subscribe to our capital increase shares could also gain returns
from selling their TSRs in the stock market.
The company issued TSRs during May-June, 2013. In that period, as high as 99 percent of
shareholders subscribed to the capital increase shares. Most shareholders were satisfied
with TSRs and believed that it was an investment alternative with worthwhile returns.
Some difficulty occurred during the process, as TSR was not that well-known among
investors and slowdown slightly the TSR exercise period as investor were trying to understand
TSR procedures and exercise methods, particularly in allotting TSRs for local and foreign
shareholders which were traded on the same board. This problem was finally solved and all
procedures completed, with successful recapitalization via TSR.”
Kanathi Sunthorpradit
Corporate Risk Management Chief
TISCO Financial Group PCL
Related laws / Regulations
Public Limited Companies Act, BE 2535
(1992)
Notification of the Securities and Exchange Commission
No. TorChor. 33/2551 Re: Application for and Approval of Offer for Sale of Newly Issued
Shares to Reserve for the Exercise of Transferable Subscription Rights
Notifications of the Board of Governors of The Stock Exchange of Thailand:
Bor.Jor./Ror. 05-00 Re: Rules, Conditions and Procedures Governing Listing of
Securities in the Category of Transferable Subscription Rights
Bor.Jor./Ror. 05-01 Re: Schedule of Fees for the Capital Increase to Support
the Exercise of Rights under Transferable Subscription Rights (No.1), 1999
62 The Stock Exchange of Thailand Building Ratchadapisek road, Klongtoey, Bangkok 10110
2014, January