About 3.1M unsubscribed rights issue of Druk PNB (DPNB) shares is on auction in the market.
This is the first time that unsubscribed shares are put up for auction in the market. Earlier the company took back the unsubscribed rights issue.
Rights issue is an issue of shares offered at a special price by a company to the shareholders in proportion to their holding of old shares.
The DPNB Bank last month announced rights Issue of 9:5, meaning for every 9 shares, the shareholders can purchase 5 shares at Nu 15 per share against the market price of Nu 26. The bank has offered 25M shares worth Nu 375M to current shareholders.
As the rights issue closed on June 11, 3.18M shares remain unsubscribed.
As per the new regulations, these shares have to be traded in an auction. This means individuals who are not shareholders of DPNB can also participate. However, the company will get only Nu 15 per share, which is the initial offer price and the shareholder who did not subscribe to the rights issue will get the remaining amount.
For instance, if an existing shareholder has one share and that person did not subscribe the rights issue, his rights will be put up in the auction. Now, if it is sold at Nu 25 in the auction, Nu 15 will go to the company and this shareholder will get to keep the remaining Nu 10.
The chief executive officer of Royal Securities Exchange of Bhutan (RSEB), Dorji Phuntsho, said that this new practice of rights offer would provide everyone an opportunity to participate in share trading. “Even people who are not the shareholders of DPNB can buy their shares,” he said. “Shareholders of DPNB who did not subscribe to the rights offer will also gain.”
Earlier, when the rights offer remained unsubscribed, the company took it back.
Trading, he said, is done on a real time basis and online unlike in the past. For this, the RSEB has trained the officials of Royal Insurance Corporation of Bhutan (RICB), who is the broker, from all the regions around the country.
As of yesterday, in the live market auction, order for 3,500 shares was placed at Nu 25 and Nu 21 per share.
Meanwhile, the bank has offered rights issue to augment the capital of the bank and to maintain the minimum capital adequacy ratio (CAR) requirement as per the prudential regulation guidelines of Royal Monetary Authority of Bhutan (RMA).
In 2016, the RMA increased the minimum paid up capital of Banks from Nu 300M to Nu 600M and made it mandatory for Banks do so before January 1, 2019.
Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock.