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Characteristics of A-Reit and Listed Property Company Rights Issues

Author/s: William Dimovski

Date Published: 1/01/2011

Published in: Volume 17 - 2011 Issue 3 (pages 357 - 369)

Abstract

Rights issue capital raisings are common amongst Australian listed property entities (including A-REITs) with 71 of them having raised over $22 billion during 2001 to 2009 by this method. This study examines some of the characteristics of these rights issues. The study finds the amount of equity sought during the GFC period by rights issues was around 2.5 times that of before, the volatility of returns was 2.5 times that of before and the discounts offered to induce investors was around 2.5 times that of before. While the rights offerings raise important equity capital for the issuers, this study also investigates whether subscribing investors have profited from taking up their right to buy more equity. The theoretical ex-rights share price is calculated for these issuers to find that over 60% of subscribers have actually suffered a decrease in wealth.

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Keywords

Equity Capital - Ex-Rights Share Price - Rights Issues, - a-Reits

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