NZ shares fall as Air NZ goes ex-rights

New Zealand headline share index fell Monday, led lower by Air New Zealand which fell sharply as shares lost the right to participate in the capital raise at a discounted price.

Monday, April 4th 2022, 6:56PM 1 Comment

by BusinessDesk

The S&P/NZX 50 Index 36.24 points, or 0.3%, to 12,053.19. Turnover was $135.7 million.

Air NZ had the biggest headline loss, plunging 22.2% to 90.5 cents with shares no longer giving the holder the right to participate in the capital raise.

Investors who bought the stock before market close on Friday will have a right to buy two more shares for 53 cents each.

They can also choose to sell those rights on the NZX, with a new instrument set up for trading under the ticker AIRRG. No rights have been traded yet.

Despite Air NZ losing value with the rights now separated from the shares, they continued to trade well above the theoretical ex-rights price (TERP) of 81 cents.

The TERP is the equivalent share price the stock was trading at prior to the capital raise announcement, once the dilution from the new shares is factored in. 

While the stock nominally dropped 22.2%, the shares trading on the market have effectively held, or even increased, in value.

At Air NZ’s current market price, Air NZ rights – which allow the holder to buy two shares at 53 cents apiece – could be worth as much as 75 cents when traded.

Besides Air NZ, some other stocks also sustained significant losses. Pushpay Holdings dropped 4.3% to $1.11 ­– after regaining 22% during March – and Vista Group International was down 3.9% to $1.75.

“Investment funds are likely to start rotating out of risky assets or ‘sell the rally’ to secure profits before finding further certainty from the upcoming earnings season in two weeks,” said Tina Teng, CMC Markets analyst.

Tourism Holdings was down 3% at $2.86 and Fletcher Building fell 2.7% to $6.21, but these losses were partially offset by gains on the other side of the board.

Oceania Healthcare shares jumped 4.7% to $1.12 and Pacific Edge regained 4% to $1.03, getting a leg up from recent broker notes saying the stock had been oversold.

Trustpower told the market the conditions for the sale of its retail business to Mercury for $441million have been met and settlement was expected to take place at the start of May.

The sale includes Trustpower’s retail contracts with 234,000 customers to supply electricity, gas, fixed and wireless broadband and mobile phone services.

Shares in the company climbed 0.9% to $7.08 and Mercury NZ shares were up 0.2% at $5.99.

The NZ dollar was trading at 69.23 US cents at 3pm in Wellington, little changed from 69.24 cents on Friday.

Tags: Market Close

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Comments from our readers

On 4 April 2022 at 8:54 pm Murray Weatherston said:
Whats wrong with thiese 2 statements taken from story
1. "Air NZ had the biggest headline loss, plunging 22.2% to 90.5 cents"; and
2. "Despite Air NZ losing value with the rights now separated from the shares, they continued to trade well above the theoretical ex-rights price (TERP) of 81 cents."

Well they can't both be correct.

My working hypothesis is that the NZX made an error when adjusting Friday's closing price for the rights issue that went ex at cob Friday.

Closing price was 126.5; issue is 2 for 1 at 53 cents. Adjusted price should have been 77.5 cents.

I reckon NZX erred by miscalculating the issue as 1 for 1 at 1.06; giving an adjusted price of 116.3. [Take off 22.2% giving 90.5.

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