The retail component of National Australia Bank Ltd's (ASX: NAB) record $5.5 billion rights issue is expected to end in just 10 days.
The chance for shareholders to sell their rights or entitlements on the ASX will end even sooner.
As I wrote here, NAB is raising the huge amount of money to fund its divestment away from its troubled UK subsidiary, Clydesdale Bank, and boost its capital reserve.
The $5.5 billion raising was broken up into an institutional component, which already raised $2.7 billion, and the retail component.
The retail component is a 2-for-25 rights issue at an offer price of $28.50.
That means, for every 25 shares you owned on 12 May 2015, you can buy two more at $28.50.
If you don't take up your right to buy the shares, you can trade them away on the ASX – under the ticker code ASX: NABR – or transfer your rights directly to another person (subject to eligibility criteria).
Entitlements stop trading on the ASX on 25 May 2015 (that is, next Monday!).
Alternatively, if you don't do anything by 1 June 2015, your rights will lapse. If you let your rights lapse, they'll be sold at an auction on 4 June 2015. This is known as a Retail Shortfall Bookbuild.
Depending on the demand for those rights, any excess purchase price above the offer price (i.e. $28.50) will be returned to shareholders (less any expenses and withholding tax).
What should you do?
There's only a limited time left to trade your rights on the ASX. Although I'm not a NAB shareholder, as I wrote last week, I wouldn't be inclined to take up the offer in full even if I was eligible.
The basic rule with these types of capital raisings is simple: If you wouldn't be prepared to buy the shares on market for the offer price ($28.50), don't take up the offer. Alternatively if you think $28.50 is a good price for NAB shares, take up the offer!
Personally, I think the 11% plus share price falls of each of the big banks over the past month says it all: buyer beware.
