How to allocate shares?

There are currently three commonly used refinancing methods for A-shares: rights issue, additional issuance and convertible bonds. Since allotment of shares does not involve the balance of interests between new and old shareholders, it is simple to operate and quick to obtain approval. It is the most familiar financing method for listed companies. So, how to allocate the rights issue?

How to allocate the rights issue?

If you hold 10,000 shares and the rights issue plan is 3 for 10 shares, you will be allocated 3,000 shares. The Shenzhen Stock Exchange stipulates that the allotment of shares less than 1 share shall be sorted by quantity, and the smaller quantities will be rounded up to shareholders with larger quantities to reach the minimum accounting unit of 1 share. During the specified period, just place an order to buy at the specified price. Shareholders may declare multiple times during the allotment payment period, but the total number of allotments declared shall not exceed the limit on the number of allotments.

There is a process for allotment of shares, which must be approved by the board of directors, shareholders' meeting, issuance review committee, and China Securities Regulatory Commission. The last step is the approval of the China Securities Regulatory Commission. In layman's terms, allotment can be understood as raising funds from all shareholders. Regardless of whether you ultimately participate in the allotment, the shares you hold will eventually be ex-righted. However, in the international market, company equity refinancing is mainly through additional issuance, and rights issue is relatively rare. This method is only used when the company is in operating difficulties and cannot attract new investors to subscribe.

Allotment refers to the act of a listed company reissuing shares to shareholders who hold the company's shares for the purpose of the company's development. It is divided into paid allotment (investors purchase the shares allotted by the company) and free allotment (listed company distributes dividends). Shares are transferred to investors in the form of dividends when dividends are paid), usually refers to the first type.

Allotment means giving you the right to add to the stock at a lower allotment price based on your original shares. Generally speaking, when facing a rights issue, you either sell or pay for the rights issue. If you don't sell or allocate shares, you will most likely suffer huge losses.