Renounceable rights issue of up to 322,665,266 new ordinary shares of USD0.10 each in XDL (“XDL shares”) (“rights shares”) at an issue price of RM0.35 per rights share, together with up to 241,998,950 free detachable warrants in XDL (“warrants 2014”) and an attached bonus issue of up to 241,998,950 new XDL shares (“bonus shares”) to be credited as fully paid-up at par, on the basis of four (4) rights shares together with three (3) free warrants 2014 and three (3) bonus shares for every twelve (12) existing XDL shares held at 5p.m. on 23 December 2013 (Ex Date: 19 December 2013).On the last cum date, XDL closed at RM0.385. The calculation of the theoretical ex-right value is as follows:
Based on this formula, the theoretical ex-right value would be RM0.3213. Instead of trading at that price, the stock rallied to an intraday high of RM0.665 on January 21, 2014.
Yesterday, the stock tumbled. Today it falls further. At the time of writing this post, XDL is trading at RM0.305. The reason for the drop: New shares will be quoted on January 27 and increasing the number of shares issued by 58%. Would the share price stabilize at the theoretical ex-right value would be RM0.3213? It is highly unlikely as a falling stock tends to overshoot on the downside. This proves that there is no such thing as a free lunch.
Chart 1: XDL's daily chart as at Jan 22, 2014 (Source: Tradesignum)
Chart 2: XDL's weekly chart as at Jan 22, 2014 (Source: Tradesignum)
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, HIL.