The 供股is when the company’s existing shareholders have the opportunity to buy shares from the same company at a discounted price. You do not need to buy from another company or the secondary market. The amount of these additional shares will depend entirely on the existing holdings of the shareowners.
The stock company announces the 供股. It will be issued to the customers who will be present on the registration date. Moreover, the exchange will be issued directly to the shareholder’s account. At the same time, the price of the underlying stock will fall and the amount of stock that falls is equal to the equity distributed.
If you want to get a clear idea, you must log in to the Huashengtong App. You have to enter the corresponding stock details page and tap the information announcement to view the entire report.
Information about equity transaction
The Hong Kong companies offer two rights divisions – Tradable Right Subscription and Non-Tradable Open Offer, and they are selected by the issuing company. The offering price is much lower than the initial stage. The price of 供股 is calculated as unentitled stock price – right issue price.
In the case of tradable equity, rights that are not distributed in the account, are added as ordinary stock through price fluctuation. After de-netting, the right value and the stock value will be equal to the asset before de-netting.
On the other hand, in the case of non-tradable equity, customers can obtain the right issue but if there is nothing the value will be zero. So, the book value will be much cheaper, and the equity will be diluted.
How to exercise the 供股?
- Huasheng application will send a message to all the stockholders who wish to get 供股.
- You have to apply through the Huasheng app (Trading page > my security business) and submit the application.
- You can apply numerous times, and your fees will be calculated for each application. You have to apply for odd lots but not the whole lot. In addition, you must have a sufficient cash balance.
- Right issue fees include handling fees, exchange fees, and Huasheng charges. They will calculate less than one lot as one lot.
- You will get a notification from Huasheng when you will complete the procedure, and you can track the records and progress of the process.
- On the day of stock distribution, Huasheng will notify you again.
The 供股 is not the fundamental stock as the trading date is short and the leverage is large enough. If you do not choose the 供股 even after expiration, you will continue to lose the investment principal. After selecting the right issue and distributing the stock, investors have to take the risk of falling stock prices.
In that case, investors have to be careful about the date of relevant rights transactions because the Huasheng application will only provide obligations. If the price of the underlying stock rises or falls, the right issue will be far exceeded which provides a significant leverage effect.