09-11-2010, 03:21 PM
Nick Wrote:Don't understand the need to issue units at 50 cents when its share price stands at 98 cents. They could have issued less shares at higher prices which would have bumped up the absolute DPU value.
There is no difference to the unitholder whether more units are issued cheaply or fewer units are issued more expensively.
Here's a simple worked example:
Initial units: 100
Trading Price $1
Total Distribution $10
DPU $0.10 ($10 / 100 units)
Case 1:
Rights Units 100
Rights Price $1
Distribution $20 (Acquisition adds $10 distribution)
Post-Rights DPU $0.10 ($20 / 200 units)
Case 2:
Rights Units 400
Rights Price $0.25
Distribution $20 (Acquisition adds $10 distribution)
Post-Rights DPU $0.04 ($20 / 500 units)
In both cases unitholders still own 100% of the distributions.
In Case 1 there are 200 units after the rights, so DPU is $0.10.
In Case 2 there are 500 units after the rights, so DPU is $0.04.
Either way, unitholders still get $20 in total distributions. For a minority unitholder who takes up all his pro-rata rights, the situation is exactly the same.