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.

All information and data contained within the PDSnet Glossary terms is for informational and educational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet glossary terms is based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any glossary term for any reason.« Back to Glossary Index