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Should you take up rights offering from REITs?

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Managers of Real Estate Investment Trusts (REITs) often have various reasons to raise funds from the capital market. The purposes could be for the purchase of assets, acquisition of another company or simply to pare down debts. To raise capital, the management may choose to issue rights offering, bonds, private placements or even borrow from the banks. In this article, I will share my perspective on rights offering from REITs.

Rights offering

Before proceeding further, it is important to understand the difference between a rights and options. The former is an offer to existing shareholders or unitholders of a REIT to purchase additional shares or units at discounted prices and the shareholders or unitholders may not take up the offer.

On the other hand, you do not need to be an existing shareholder or unitholder in order to buy options, which give you the right but not the obligation to purchase the underlying shares or units at a pre-set price. Nevertheless, if you choose not to exercise the option, you would have forfeited the fee relating to the option cost.

Basically, a rights issue is a form of equity financing for listed companies or REITs. It gives existing shareholders or unitholders the rights to purchase additional shares or units in proportion to their existing holdings, within a given timeframe. To entice shareholders or unitholders, [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: May 12, 2018 — 2:29 pm

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