Whether you are a professional investor or a part-time investor, you might have heard of Rights Entitlements. But, if you did not get what it means at first glance, believe me, you are not alone. In fact, there are many people who fail to understand the appropriate meaning of this phrase. So, to help you understand all about Rights Entitlements, I am going to answer some of the most frequently asked about it.
Since the Corona Virus has gripped the world's economy, a surge of disturbance has erupted. To make matters worse, many multinational companies and the biggest corporations have incurred unprecedented losses. As a result, in order to cover up the financial loss, many investors are seriously thinking of selling rights entitlements on the stock exchange.
As you are reading this post, chances are quite high that you are also wondering whether you should sell your REs or not. On the other hand, some of you might be wondering whether this is the right time to buy REs or not. So, the idea here is to understand first all about the Right Entitlements to make sure you don't have to regret later on.
What does mean by Rights Entitlements?
In simple words, the right entitlement is nothing but just a process in which a company announces how many shares a stakeholder can have. It means when a company specifies the limit for selling and buying additional shares for stakeholders is called Rights Entitlements.
Let's take an example to understand the concept of the right entitlement. Last year, one of the reputable organizations in the domain of agriculture SFPL offered four equity shares for every 18 equity shares held. It means stakeholders of SFPL were allowed to buy four equity shares for every 18 equity shares held. The concept was applicable to selling shares. Find more information in the next column.
How do Rights Entitlements work?
Registered shareholders who hold shares on the rights issue’s record date are eligible to receive REs. Also, it is worth noting that the REs are credited at least one day before the rights issue opens for trading. Moreover, the REs have a separate International Securities Identification Number (ISIN) code with the help of which you can identify and do trading safely and securely. REs appear like any other share listed in your Demat account.
How do I sell Rights Entitlement on the stock exchange?
However, the task of selling Right Entitle on the stock exchange is not a big deal. But, for a hassle-free experience, you need to keep in mind some of these facts. Be informed that REs could be sold in the secondary market. And the process of selling is the same as regular stock trading. Always remember that whenever it comes to delivery, the sold REs are marked accordingly. Is intra-day trading allowed in RE? You might like to ask this question. So, here is the answer-No. Intra-day trading is not permissible as of now.
One more important point to bear in mind is that the task of selling REs is allowed until a few days before the issue closing date. The best part of REs is that it allows the shareholders to sell it easily to those investors who want to buy REs at the traded price on the stock exchange. But, to make sure you gain the profit, take your time to estimate the demand and supply requirement then think of the bid and quotes.
Once you sell off your REs, it can take up to 2 workings days to receive the amount in your trading account. What you may not know is the fact if you are a stakeholder and eligible to take part in the right entitlement issue, and then you don't have to pay anything to acquire REs.
That was all about rights entitlements in today's blog. We are sure you will find all the information quite helpful and effective. Don’t forget what I have told about selling REs that the process of selling right entitlement is the same as selling stock trading. All you have to keep in mind is only the limit you have given by the company. For more information, feel free to get connected with us.