Rights issue: Gateway Distripaks RE doubles in merely 3 trading sessions!

As more and more corporations are raising money via rights issues, investors are closely tracking the performance of rights entitlement (RE) of various issues.

The latest in the pack is Gateway Distripaks Ltd (GDL) RE. GDL has announced a right entitlement ratio of 4:27. The rights issue will be closing on August 13, 2020. The rights issue of Rs 150 crore opened on July 30, 2020, with a fixed price of Rs 72 per share for the rights share sale.

GDL is engaged in providing integrated intermodal logistics services. The company mulls reducing debt with the proceeds of this rights offering. GDL RE got listed on July 30, with the REs available at Rs 11 per share on NSE. When the trading closed on August 3, GDL RE was trading at Rs 21.70 per share. The REs jumped by nearly 100 per cent in just three trading sessions.

Rights entitlement (RE) is nothing but the number of new shares that a shareholder of a company is eligible to apply for, under the rights offers. With the new system in place, it is easy to trade in REs for investors. Now, the shareholders, who are not interested in subscribing to the issue can sell their entitlement to those who are interested in buying those entitlements at a traded price, as these REs are listed on the stock exchange just like ordinary shares.

Higher or rising prices of REs indicate a good demand for the REs and can be used as a gauge for investors’ appetite for the rights issue.