Term: ACCEPTANCE DATE

The date on which the right acquired by a shareholder as a result of a rights issue must be exercised. Listed companies often raise additional capital from their existing shareholders by undertaking a rights issue. This means that they offer additional shares to their existing shareholders, in proportion to what they already hold at a discount. These rights are embodied in a document called a “renounce-able nil paid letter of allocation” or “NPL” for short. When there is a rights issue, the company sends out NPLs to all their shareholders holding the shares on a  certain date (although these days they arrange for the NPLs to appear on their portfolio in their trading platform). The shareholder must then either sell these NPLs or take up the shares before the acceptance date. After the acceptance date, the NPLs have no value. The NPLs are usually listed on the JSE alongside the ordinary shares of the company for a period of about six weeks, ending on the acceptance date. This enables holders of the NPLs to sell them to other investors. The NPL has a value determined by the difference between the current market price of the ordinary share and the take-up price.

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