Currently on the Sharesies platform, you can only participate in selected shortfall offers run by a company listed on the New Zealand Stock Exchange (NZX).
What’s a shortfall?
When a company raises capital (cash) through a rights offer and its existing shareholders don’t turn all of their rights into new shares, the company might run a shortfall so that any leftover shares can be bought by other investors.
The offer price (the price investors pay per share they buy) is either fixed or determined by a ‘bookbuild’.
Fixed price shortfall
If the price is fixed, the shortfall will generally be offered at the same price as the rights offer. For example, if the right offer exercise price was $1.50, the price for each new share through the shortfall would be $1.50.
Bookbuild shortfall
If a bookbuild is used, the shortfall offer price is either equal to or above the rights offer price but isn’t confirmed until the offer closes. Meaning, investors have to apply for the shortfall without knowing what price they’ll pay per share.
The company asks investors for the maximum price they’re willing to pay per share and the total dollar amount of shares that they would like to buy through the shortfall. Then the company determines the level of demand at a range of prices and figures out what overall price will help them raise the amount of the shortfall.
Who can take part?
Investors who own shares in the company and are eligible to take part in the rights offer can usually apply for more shares through a shortfall. Investors need to exercise all the rights they’ve been allocated before they can apply for the shortfall.
Applying for a shortfall
If you’re an existing shareholder, make sure you’ve exercised all the rights allocated to you before you apply to take part in the shortfall.
Go to Explore and search for the company running the shortfall or find the company in your Portfolio.
On the company’s page, select Buy > Apply for shortfall.
Enter the maximum amount of money you’d like to invest through the shortfall.
If a bookbuild is being used, enter the highest price you’re willing to pay per share.
Review and confirm your order.
Make sure you have enough money in your Wallet at the time of your application. If you need to convert currency to pay the offer price, you’ll need to pay a currency exchange fee.
If there’s more interest in the offer than there are shares available, your application might be scaled. This means you may receive fewer or none of the shares that you apply for.
Once you’ve applied to take part in the shortfall, the application will show in your Portfolio until the offer closes. If your application is successful, you’ll receive the new shares on the ‘allotment date’ which is usually about a week after the offer closing date.