I'll repeat that, You need to act today!
Following National Australia Bank Ltd's (ASX: NAB) recent decision to raise $5.5 billion of capital, retail shareholders have until today to trade away their entitlements to new shares on the ASX.
As I noted here, NAB's retail shareholders are being asked to take part in a 2-for-25 rights issue (which would see them buy two new shares for every 25 they currently own), at a price of $28.50 each.
Eligible shareholders can do one of two things: They can take up the offer and buy new shares; or transfer (sell) their entitlements directly to another eligible person or via the ASX.
Most shareholders will likely elect to transfer the right to buy the new shares on the ASX. These trade under the ticker code ASX: NABR. Just like an ordinary stock, you can log into your account and sell them.
However, shareholders have until 4:00 pm today to trade their NABR entitlements on the ASX.
While the opportunity to buy the new shares remains open until Monday 1 June 2015, if no action is taken before that date the entitlement will lapse. In this case, your entitlements will be sold at a retail shortfall book build.
This is an auction process that gives institutions the right to bid for any lapsed options – it will take place on 4 June 2015.
At the auction, any premium paid above the offer price of $28.50 will be returned to eligible shareholders who didn't participate, as well as ineligible shareholders, less any withholding tax and costs.
What should you do?
There's only a limited amount of time left to trade your rights on the ASX. Although I'm not a NAB shareholder, as I wrote last week, I wouldn't be inclined to take up the offer in full even if I were eligible.
The basic rule with these types of capital raisings is simple: If you wouldn't be prepared to buy the shares on market for the offer price ($28.50), don't take up the offer. Alternatively if you think $28.50 is a good price for NAB shares, take up the offer!
Personally, I think the 11% share price falls of each of the big banks over the past month says it all: buyer beware.
