Rights to Purchase Additional Shares

RIGHTS TO PURCHASE ADDITIONAL SHARES

In the Vietnamese stock market, issuing additional shares is a vital tool that helps enterprises raise capital to expand production and business, restructure finances, or implement long-term growth strategies. Among the various issuance methods, offering shares to existing shareholders accompanied by Rights Issues is a popular form. This ensures fairness and limits the dilution of shareholder interests. In the investment community, this is often referred to as a "capital increase game." If investors do not understand the "rules of the game," they can easily fall into a "double loss" situation. Because purchase rights have an expiration date, if you neither exercise the right (deposit money to buy) nor transfer it to someone else within the specified period, the right will automatically become worthless. Consequently, you will suffer heavy losses because the stock price is adjusted downward on the ex-rights date.

First, it is important to understand that the right to purchase additional shares is a type of short-term warrant issued by a joint-stock company to existing shareholders. It allows them to purchase a number of new shares corresponding to their current ownership ratio at a preferential price, which is usually lower than the market price. This is a benefit attached to the stock and is one of the common ways for businesses to mobilize capital from their own shareholders.

Key Characteristics of Purchase Rights

In essence, purchase rights have several important characteristics that investors must master:

• Preferential Nature: The offering price of the purchase right ($P_a$) is always lower than the market price of the stock at the time of announcement ($P$), creating an attractive advantage for existing shareholders.

• Transferability: In most cases, purchase rights are allowed to be freely traded on the market within a specific period determined by the enterprise (usually 30–45 days). This allows investors to sell their rights if they do not wish to exercise them, rather than letting the benefit expire. However, note the regulation: rights can only be transferred once, meaning the transferee is not permitted to transfer them again to a third party.

• Expiration: Purchase rights are only valid for a specific timeframe. If an investor does not exercise or transfer the rights before the deadline, they become worthless.

Valuation and Market Mechanics

One of the key issues is that on the ex-rights date (usually the day before the last registration date), the stock price will be adjusted downward to reflect the separation of the purchase right. The difference between the stock price before the ex-rights date ($P$) and the adjusted price ($P'$) is the theoretical value of one purchase right attached to each share. In other words, the decrease in the stock price is exactly the value that the purchase right brings; thus, shareholders do not lose out because they still hold that valuable purchase right.

Practical Example: SSI Securities Corporation

Consider the case of SSI Securities Corporation in its offering to existing shareholders at the end of 2025:

• Execution Ratio: 5:1 (Shareholders owning 5 shares can buy 1 new share).

• Issuance Price: 15,000 VND/share.

• Market Scenario: Assume that during the transfer period (e.g., late December 2025), SSI stock is trading at 30,000 VND. Investor B owns 5,000 SSI shares and receives 5,000 purchase rights.

The theoretical value of the right to buy one share is calculated as:

Thus, Investor B’s 5,000 purchase rights have a total theoretical value of 12.5 million VND.

In reality, Investor B and a buyer (Mr. C) will negotiate. If Mr. C expects SSI's price to rise to 35,000 VND next month, he might accept buying the rights at a higher price, such as 3,000 VND/right. Conversely, if the market is volatile, Mr. C may only want to buy at 2,000 VND/right to offset the risk. The final price is the level where both parties feel comfortable based on their information and expectations. Upon a successful transaction, Investor B must be mindful of Personal Income Tax obligations on the transfer, with a tax rate of 0.1% of the transfer price.

Important Timelines and Procedures

It is worth noting that the deadlines for these procedures are usually very tight and strictly fixed. For instance, in the SSI issuance, the right transfer period lasted only two weeks (Dec 17, 2025 – Dec 30, 2025), and the period to register and pay for the shares was about three weeks (until Jan 8, 2026). Investors must pay close attention to avoid missing the opportunity or letting their rights expire. Regarding fractional shares resulting from the issuance ratio, most companies apply a "round down" policy and handle the remaining fractions according to specific regulations.

In summary, the right to purchase additional shares is both a benefit and a valuable investment opportunity. Understanding its nature, the mechanism for determining theoretical value, the factors affecting actual transfer prices, and mastering the procedural requirements at securities firms are the keys for investors to make informed decisions: either exercise the right to increase ownership at a discount or transfer the right to realize a direct profit.