# HELP!! Rights offering



## thompsg4416 (Aug 18, 2010)

Hey guys and gals - I could use your help on this one. 

I own 2000 shares of TRQ and they are doing a rights offering.
http://www.marketwatch.com/story/tr...ence-2013-12-02-17173050?reflink=MW_news_stmp

I've never been in this position before and I could use some advice on how it works exactly.

From what I understand I have the right to buy 2000 more shares at 2.40Usd beginning on Dec 4th and ending January 7th. Apparently they will mail me some stuff but considering my location in china I'll have to have someone in my family fax or scan it to me. 

I'm hoping this is something I'll be able to look after electronically?

The other part I don't understand is what happens if I don't exercise my rights. My ownership of TRQ will be reduced accordingly? as a percentage since the common shares will be diluted??? or how exactly?

Anyone else ever deal with one of these before?


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## Toronto.gal (Jan 8, 2010)

thompsg4416 said:


> 1. From what I understand I have the right to buy 2000 more shares.
> 2. The other part I don't understand is what happens if I don't exercise my rights.


I had similar scenario with Ainsworth Lumber.

What the company is doing, is raising money from existing shareholders; I gather it's due to the delays in Mongolia.

*1.* Yes.
*2.* If you don't exercise your Rights Offering, I believe you would get reimbursed for them, ie: an amount x 2,000 sh. Not sure how that works exactly, as I exercised my full Rights, so maybe someone else can elaborate.

If you're going to buy, pay attention to the dates, and yes, it's all done electronically. In my case, my broker handled it for me; I just gave them my instructions.


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## MRT (Apr 8, 2013)

a bit more info: http://seekingalpha.com/news-articl...-of-interim-funding-and-new-bridge-facilities

I've never dealt with this before either, but I'm in a similar boat (less shares though). 

So, as the press release notes, it seems that current shareholders will have the right to buy an equivalent amount of shares at the lower price, or sell that right to do so on the open market; however, if we do nothing we simply see our ownership share of the company effectively lowered, since there will be x amount of additional shares issued as a result of this rights offering (and I suspect a LOT of people will take advantage of the offer).

Won't this presumably have a impact on the current stock price???


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## thompsg4416 (Aug 18, 2010)

"Won't this presumably have a impact on the current stock price???"

Yep.. more dilution means lower price generally.


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## thompsg4416 (Aug 18, 2010)

I think if you don't exercise your rights you just lose them - no re-reimbursement just dilution. Not cool for those types of investors who just buy and hold and check in every few months..lol Perhaps i'm wrong I can't say.

Regarding the rights offering - I'm a little hesitant to exercise my rights on this one. I already have over 15k sunk in this in my TFSA alone and another 3k in my RRSP for almost 20k. Might just sell my rights to make some cash and sink it in something a bit more predictable!! We'll see.


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## Toronto.gal (Jan 8, 2010)

thompsg4416 said:


> 1. I think if you don't exercise your rights you just lose them...
> 2. Regarding the rights offering - I'm a little hesitant to exercise my rights on this one.


*1.* No, you don't. From the link you posted:

*"Shareholders who do not wish to exercise their rights to buy new common shares under the offering will have the option of selling the rights that they receive from Turquoise Hill through the TSX, the NYSE or NASDAQ." * 

*2.* I understand perfectly. The reduced price is not all that one should take into account. In my case, the Offering came at the time that I had wanted to increase my shares anyway, so it worked out very well for me.


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## humble_pie (Jun 7, 2009)

as the TRQ press release says, rights can be sold on a stock exchange or else exercised during the active period. Shareholders really shouldn't just let their rights expire, though. That would be a waste.

in general, the de facto dilution mentioned by both thomps & MRT does occur. But think of it this way: company could have raised new capital with a secondary share offering to the general public, via traditional underwriters. That would have diluted just as much. This way, they are raising new capital by first cruising through the existing shareholder base, offering each of them a little rights tidbit.

however, others might think that this speaks to a certain lack of confidence the company feels in raising new $$ via a straightforward secondary share offering?

some might even think the company has tested the waters at their traditional underwriters & the response was not exactly warm or encouraging?

many will note that the new shares obtainable under the rights offering have a 42% discount from TRQ market price a few days ago?

there are always such huge amounts of speculation surrounding these deals!

the company's news release says that rights will commence trading tomorrow on a when-issued basis on nyse & nasdaq. It gives the symbols, TRQ RT WI & TRQ.V respectively (hint, if trq rt wi doesn't work tomorrow on new york, try the symbol with dots between.) Prices of these when-issued rights (in essence they are kind of premarket rights) will tell you how the deal is looking to the market.

canada will have no when-issued market but will start up trading in the rights themselves a few days later.

during their active life of about 30 days, the rights will swing up & down with the price of the stock, like call options on steroids. Oops i think i can hear the starting pistol being fired. Best of luck to everyone in the race!


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## thompsg4416 (Aug 18, 2010)

Toronto.gal said:


> *1.* No, you don't. From the link you posted:
> "Shareholders who do not wish to exercise their rights to buy new common shares under the offering will have the option of selling the rights that they receive from Turquoise Hill through the TSX, the NYSE or NASDAQ."


They have the option and if they don't sell them? what happens? Do they get re-reimbursed at market price or they just lose out? I'm going to either sell or buy but I was just curious.

HP: Something else i'm confused about - will my rights show up in my brokerage account? I.E how do I actually go about selling them if I want? Perhaps a question for questrade. I don't expect they'll be ahead of the game on this one as usually they'll be behind. There's a reason you get $4.95 trades


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## humble_pie (Jun 7, 2009)

thompsg4416 said:


> They have the option and if they don't sell them? what happens? Do they get re-reimbursed at market price or they just lose out? I'm going to either sell or buy but I was just curious.
> 
> HP: Something else i'm confused about - will my rights show up in my brokerage account? I.E how do I actually go about selling them if I want? Perhaps a question for questrade. I don't expect they'll be ahead of the game on this one as usually they'll be behind. There's a reason you get $4.95 trades



quite often investor who doesn't act on his rights just loses out. This is no time to slouch around.

it may take a while for any broker, let alone questrade, to push the rights into the proper accounts. Keep in mind that these rights haven't even been issued yet (that's why there's going to be a WI - when-issued - market in the US of A)

when rights don't show up promptly in accounts, brokers should still be prepared to sell em for clients who want to sell em at web commish IMHO. Such clients would have to phone their orders in ... when such clients are in china, the mind does boggle though.

thomps i think you would have to deal with questrade's Chat, get their advice on how to force through a sell or an exercise order. Keep in mind that, if exercising, you have until early january (the price is fixed, is it not?) & likely by 12th december or so, at the latest, all the rights will have wound up in clients' accounts where they belong.


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## Toronto.gal (Jan 8, 2010)

thompsg4416 said:


> 1. They have the option and if they don't sell them? what happens? Do they get re-reimbursed at market price or they just lose out?
> 2. will my rights show up in my brokerage account? I.E how do I actually go about selling them if I want? Perhaps a question for questrade.


*1.* If you don't buy, the Rights will be considered sold then. What I don't know, is what you would get for them. As I said, I exercised all Rights.

*2. * No, at least not with my brokerage. After I received notice via mail, I contacted my broker and they handled it for me. When shares were purchased, they showed up in my account as: RECEIVED FOR RTS EXERCISED


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## Toronto.gal (Jan 8, 2010)

humble_pie said:


> quite often investor who doesn't act on his rights *just loses out*.


Do you mean that the Rights Offering can expire worthless so to speak? I don't think so, but I have limited experience, so I'm not sure.

Another thought for the OP, is that you might want to sell some rights to cover for those you may want to buy, since as you mentioned, you have enough invested in this already.


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## MRT (Apr 8, 2013)

humble, you have very much captured my confusion...

rather than just the dilution effect that would come with any additional offering, I'm puzzled as to why TRQ chose the route of a rights offering to existing shareholders at 40%+ below the current share price. Colour me a pessimist, but I can't help suspecting that one of your hypotheses could indeed be the case, namely that exploring a more conventional offering to the general public received a lukewarm (or ice cold) response behind the scenes. 

Regardless, barring having second thoughts about holding TRQ altogether, I am trying to think of a reason why one would NOT fully exercise all rights, given the discount to the current price. I guess if someone is already overweight, they may think twice, but if one sits on the sidelines, you'll realize the dilution effect and have nothing to show for it (except for whatever the sale of those rights nets). Am I missing something? 

Toronto.gal, thanks...I was wondering about the actual process too, and will confirm with TDW whenever I receive details in the mail.

FWIW: 

"Under an agreement with Turquoise Hill, Rio will be required to buy shares that are not taken up under the rights offering, subject to some conditions. The preliminary prospectus did not include the size of the proposed offering."

http://www.theglobeandmail.com/repo...lgoi-on-mongolia-uncertainty/article15436434/


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## humble_pie (Jun 7, 2009)

Toronto.gal said:


> Do you mean that the Rights Offering can expire worthless so to speak? I don't think so, but I have limited experience, so I'm not sure.



one would have to read the prospectus (apparently it's already filed on SEDAR) to learn what details govern compensation, if any, for expired unexercised rights in this trq issue.

in a classic rights issue, they expire worthless. It's either exercise em or sell em. But there can always be modifications to any thing in finance, as u know.


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## humble_pie (Jun 7, 2009)

MRT said:


> ... I am trying to think of a reason why one would NOT fully exercise all rights, given the discount to the current price. I guess if someone is already overweight, they may think twice, but if one sits on the sidelines, you'll realize the dilution effect and have nothing to show for it (except for whatever the sale of those rights nets). Am I missing something?
> 
> FWIW:
> 
> ...




i'm not a trq shareholder, have not been for several years, so am not up on all the fine points of the situation.

if there is fear in exercising, it would be fear that share price will take a big whack down, given that trq has priced itself so low in this deal & also given the dilution.

i'm not a fan of adjusting cost bases down, although i know it can work for some.

i think everything depends on the prices that will show tomorrow. It might be necessary to phone to brokers for when-issued rights quotes, these probably won't have been installed in quote systems by tomorrow, although the news release does say the WIs start trading in US markets tomorrow.

a party feeling frisky could also look at january option prices in both canada & the US, these will have a relationship to the rights.

very interesting that RIO will take up & pay for any shares not sold in the rights offering. This strikes me as a kind of downside guarantee, i'd find it comforting if i were long TRQ at this moment.


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## thompsg4416 (Aug 18, 2010)

I hold the majority of my TRQ in my TFSA... I don't have the 5k in cash sitting there to make the purchase even if I wanted to. Which means i need to either sell some shares of something I already own or sell the rights to cover the purchase. Option 3 is to wait until the new calendar year and use up my new TFSA contribution room on the purchase. I won't let the rights just expire and do nothing but I do need to figure out whats best. Getting some money out via selling the rights and putting it in something that makes money could be better long term. I guess it depends how long you think its going to take for TRQ to finally "pop". Selling some rights to cover the cost of the purchase is a cheap/"Free" way to average down as well. Lots of questions - who has the answers


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> *1.* If you don't buy, the Rights will be considered sold then. What I don't know, is what you would get for them. As I said, I exercised all Rights.


I suspect YMMV depending on the details of each offer ... the rights I was offered and missed the deadline to use were retracted & I received nothing for them. Similar to Humble's comment that to not use & not sell can be a waste.





Toronto.gal said:


> *2. * No, at least not with my brokerage. After I received notice via mail, I contacted my broker and they handled it for me. When shares were purchased, they showed up in my account as: RECEIVED FOR RTS EXERCISED


 ... that might be a difference in either the offer and/or the brokerage ... with the push to paperless & online access, the rights I've been offered showed up online, before using them or selling them.


Cheers


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## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> *1.* I suspect YMMV depending on the details of each offer ...
> *2.* the rights I was offered and missed the deadline to use were retracted & I received nothing for them.
> *3.* Similar to Humble's comment that to not use & not sell can be a waste.
> *4.* the rights I've been offered showed up online, before using them or selling them.


*1.* Indeed it would depend on the details of each offer. I had simply stated my personal experience with ANS, which had been to exercise full Rights [you must know how difficult it is for me to pass a solid bargain of $1+], so I was not sure how it worked in the selling scenario. I had thought that perhaps the selling would be automatic if and when no action would have been taken [that had been my question to HP]. 

*2. *Wow, I'm surprised you would have missed such a deadline. Also surprised that the broker would not have given you a courtesy call reminding you [I receive such calls].

Have you regretted it, if I may ask? So in your case, you took no action, but what if you had let's say, exercised 1/2 your Rights, ie: taken action, would you then have automatically been reimbursed for the other 1/2 in that case, I wonder?

*3.* I completely agree, and why I mentioned on my 1st post to pay attention to the dates!

*4.* How were they described? Some people don't read their mail [in a timely manner I mean], and if not paying attention to the account details, especially for buy/hold shares, may have missed it altogether, so it's best to read one's mail.


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## humble_pie (Jun 7, 2009)

i am so not getting this each:

rights when-issued are trading on new york as TRQ.IR. Last at .92, volume 24,000.

meanwhile stock is 4.22, actually up on the day.

Q: what's stopping a party from shorting stock at 4.22; buying rights around .92; exercising for the prescribed USD 2.40; thus acquiring stock at USD 3.32 which will be used to cover the short position in january?

A: what's stopping this delicious scenario is that there's never any free lunch. Never. So there has to be something excruciatingly wrong with my thinking. Drat.


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## humble_pie (Jun 7, 2009)

A: maybe there's a general lack of confidence in the when-issued rights.

if stk is 4.22, those rights should be trading around 1.82 USD.


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## daddybigbucks (Jan 30, 2011)

I also seen the Rights from Ainsworth and i do believe they will expire worthless. I guess they should call them "Privileges" then.

They will trade on the TSX. It is hard to calculate the true value of them but I usually found that the rights are a buyers market in the start and become a sellers market later on. 

The best option i heard to do with rights is to sell enough rights to acquire the right shares. A little calculation is needed there.


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## humble_pie (Jun 7, 2009)

any rights i've ever heard of expired worthless. That's why rights holders cannot slouch around, they've only got about 30 days to operate.

i for one don't care for this TRQ deal. It's one billion new shares to be added to the existing one billion. That'll be $2.40 billion US dollars the company is looking to raise. It's to pay off old debt that's now due, not finance any new purchase or development.

taking the rights route means the company is essentially holding a gun to shareholders' heads, saying Exercise you Rights & Pay Up, or else you Stock is going to Plunge after Dilution.

one might even consider the word blackmail.

many shareholders don't have the cash on hand to buy all the shares available to them under the rights issue.

meanwhile, turquoise hill founder Robert Friedland has launched another one of his trademark graceful initiatives, calling canadian investors "idiots" for worrying about stock dilution.

“Idiots in Canada do not understand rights offerings are not dilution..everyone participates equally…rights offerings are the fairest form of equity finance ever developed by the human mind,’’ Friedland wrote in an email to Tommy Humphreys at Ceo.ca yesterday evening.

http://www.stockhouse.com/news/natu...s-in-canada-do-not-understand-rights-offering

friedland, as it happens, is beyond infamous in mining circles. He is nefarious. His was the company that built a winter cyanide leach pad high on the rocky mountain continental divide at Summitville in colorado, in defiance of a specific US department of the environment order not to do so.

the leach pad broke in heavy winter storms at the high altitude, of course, badly polluting the headwaters of rivers that flow into 2 oceans plus the gulf of mexico. Friedland was indicted by the US government, which had to pay for the cleanup.

for years, friedland could never enter the US of A. It was only after he accidentally discovered Voisey's Bay & got some money again that he was able to settle up with the US DOJ & off the arrest warrant that had been waiting for him at each & every US border crossing.

Oyu Tolgoi - turquoise hill in mongolian - is a later friedland venture. Another on-again-off-again "success" story in friedland's checkerboard career. He sold to RIO years ago, but he's still a TRQ insider shareholder.

how the turquoise hill story will end up, nobody knows. There's big opposition in mongolia. As often in friedland's career, the jury is still out.


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## liquidfinance (Jan 28, 2011)

humble_pie said:


> any rights i've ever heard of expired worthless. That's why rights holders cannot slouch around, they've only got about 30 days to operate.
> 
> i for one don't care for this TRQ deal. It's one billion new shares to be added to the existing one billion. That'll be $2.40 billion US dollars the company is looking to raise. It's to pay off old debt that's now due, not finance any new purchase or development.
> 
> ...


Ahh.. Fond memories. 

One of my first lessons of investing. I remember having that gun held to my head with a UK house builder. At first I thought I was getting such a bargain as when the rights were announced the shares were roughly double. They soon dropped to the rights price leaving me little choice to sell at a loss or take up the rights. 

Lesson learnt. I managed to get out ok in the end but I was very worried.


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> *1.* Indeed it would depend on the details of each offer. I had simply stated my personal experience with ANS, ...


 ... and I was stating one of my experiences to highlight that like so many other things in investing, there's variation.




Toronto.gal said:


> *2. *Wow, I'm surprised you would have missed such a deadline. Also surprised that the broker would not have given you a courtesy call reminding you [I receive such calls].


 ... stuff happens ... you get sick at the wrong time, have a family emergency or whatever and it's not the "same old, same old" all of a sudden.




Toronto.gal said:


> Have you regretted it, if I may ask?
> So in your case, you took no action, but what if you had let's say, exercised 1/2 your Rights, ie: taken action, would you then have automatically been reimbursed for the other 1/2 in that case, I wonder?


From what I recall, I though exercising the rights was too expensive compared to where I expected the market to be .... so the "regret" is not selling but I'm not going to sweat what I couldn't control at the time.




Toronto.gal said:


> *4.* How were they described?


I'll have to find the monthly statement to get the exact label but the listing online of the stock held had one line item for the actual stock and a second line for the rights.

So it looked something like:

Number Name  
100 BNS 
100 BNS RTS expiry Dec 22 

So as you say - just like it's easy to miss the mail version by not staying on top of things, the online version can be missed as well.


Cheers


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## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> stuff happens ... you get sick at the wrong time, have a family emergency or whatever and it's not the "same old, same old" all of a sudden.


So true! 

By 'surprised' btw, I was referring to your meticulous attention to detail.


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## humble_pie (Jun 7, 2009)

predictably the bottom has fallen out of the turquoise mountain

anybody w rights, don't let the palaver get in your way. You have to act before early january or forever hold your peace. The company is never going to reimburse you for rights that you ignore. Not by a farthing, not by a sou, not even by a tögrög.


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## MRT (Apr 8, 2013)

*sigh*

nice plunge today. As for Mr. Friedland's gross misrepresentation of what the rights offering truly means, I'm amazed that he has the nerve to call investors idiots.

I still have confidence in the Oyu Togoi project though...in fact, I don't think there is dispute regarding its potential. The political shenanigans with the Mongolian gov't is another matter of course  but I think (hope) there is too much on the table for a prolonged battle.

I see little viable option other than to exercise all rights and hunker down for the long haul (which was my intention with TRQ before all of this anyway). Fortunately, I'm not sitting on thousands of shares, so the cash isn't hard to free up to do so...but I sympathize with those who are in a less convenient situation.


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## thompsg4416 (Aug 18, 2010)

MRT said:


> *sigh*
> 
> nice plunge today.


Yeah this is one tough investment. I'm a bit of a contrarian investor so I've learned to have balls of steel(can I say that??) when dealing with these sorts of things. However there is a fine line between a steel set and stupidity and I'm tip toeing that line right now.

I remember a couple years ago I bought into SAN(Santander - Spanish bank) during the EU crisis when it was in the high 8's and then it went into a free fall. I believed in the stock and I kept an eye on the fundamentals and even averaged down into the 5 dollar range. In the end I sold for over $8 a share. I was very tempted at many points along the way to cut my loses and bail but I didn't.

As I said there is a fine line between being smart and stupid - TRQ and SAN aren't the same company. As you said MRT I believe in the product of that there is no doubt - however I can't say I believe in the management. At this point I wish I never got involved with TRQ but its too late for that now. So its a matter of cutting loses or buckling down for the even longer haul... I'm leaning towards buckling down if only because at this point the upside is so much more then the down.


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> So true!
> 
> By 'surprised' btw, I was referring to your meticulous attention to detail.


 ... it doesn't help much when one is under the weather ... 

I tend to try to the address the times I can control instead of the rare time I'm out of it ...


Cheers


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## thompsg4416 (Aug 18, 2010)

One more quick question - it maybe a question for questrade but I'll try here first. I created a corporate action as instructed by questrade to exercise my rights offering. The corporate action is now complete. But the rights are still sitting in my account as is the money. Do I need to make the purchase now or will questrade? What's next?


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## MRT (Apr 8, 2013)

The brokerage should handle it once they receive your instructions...but confirm with them. That was my understanding from reading the material.

FWIW, I decided to sell my rights this week, rather than exercise. I missed the peak by a fair amount, selling at 0.88, but they are down to 0.71 now.

Unless I'm missing something, the 'deal' of the lower offering price seemed to evaporate, as the spread between the value of the rights and the difference between market and offering price was virtually nil (and I believe, for brief periods, the value of the rights exceeded that spread!?!). That didn't seem like a great opportunity. I'd rather take my chances by selling the rights for certain cash, deploying that money elsewhere, and perhaps adding to my position in TRQ on further weakness in the future. 

Time will tell if that was a wise choice, but I didn't feel great about spending money (at what amounted to market price), just to avoid dilution.


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