{"id":6517,"date":"2024-11-23T17:02:55","date_gmt":"2024-11-23T12:02:55","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=6517"},"modified":"2024-11-23T17:36:50","modified_gmt":"2024-11-23T12:36:50","slug":"mughal-right-shares-3-things-to-know-before-subscribing","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/mughal-right-shares-3-things-to-know-before-subscribing\/","title":{"rendered":"MUGHAL right shares &#8211; 3 things to know before subscribing"},"content":{"rendered":"\n<div class=\"wp-block-aioseo-table-of-contents\"><ul><li><a href=\"#aioseo-details-of-the-right-shares-issue\">Details of the MUGHAL right shares issue<\/a><\/li><li><a href=\"#aioseo-things-to-know-before-buying-the-right-shares\">Things to know before buying MUGHAL right shares<\/a><ul><li><a href=\"#aioseo-1-no-dividend-or-bonus-rights\">1. No dividend or bonus rights<\/a><\/li><li><a href=\"#aioseo-2-unlisted-shares\">2. Unlisted Shares:<\/a><\/li><li><a href=\"#aioseo-increased-voting-rights\">3. Increased Voting Rights<\/a><\/li><\/ul><\/li><li><a href=\"#aioseo-is-this-legal\">Is this legal?<\/a><\/li><li><a href=\"#aioseo-mughals-history-of-right-shares\">MUGHAL&#x27;s history of right shares<\/a><\/li><li><a href=\"#aioseo-conclusion\">Conclusion<\/a><\/li><\/ul><\/div>\n\n\n\n<p>On November 5, 2024, Mughal Iron &amp; Steel Industries Limited (MUGHAL) announced a unique rights share issue involving <strong>50,000,000<\/strong> new Ordinary <strong>Class-C shares<\/strong>. This offering brings several distinctions compared to traditional rights issues, particularly regarding voting rights. Let\u2019s break down the specifics of this offering and why it stands out.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"aioseo-details-of-the-right-shares-issue\">Details of the MUGHAL right shares issue<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Number of Shares Issued<\/strong>: 50,000,000 shares.<\/li>\n\n\n\n<li><strong>Face Value<\/strong>: Rs. 10 per share.<\/li>\n\n\n\n<li><strong>Offering Price<\/strong>: Rs. 30 per share, including a premium of Rs. 20.<\/li>\n\n\n\n<li><strong>Entitlement Ratio<\/strong>: Approximately 14.90 Class-C right shares for every 100 existing ordinary shares.<\/li>\n\n\n\n<li><strong>Purpose<\/strong>: To replace some of the debt-financed working capital with equity-financed working capital.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"aioseo-things-to-know-before-buying-the-right-shares\">Things to know before buying MUGHAL right shares<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"aioseo-1-no-dividend-or-bonus-rights\">1. No dividend or bonus rights<\/h3>\n\n\n\n<p>Holders of Class-C shares will <strong>not be entitled to dividends or bonus<\/strong> shares declared by the company. This makes them distinct from typical rights offerings, where dividend entitlement is standard.<\/p>\n\n\n\n<p>For retail investors, dividends often provide a steady source of income and are a key attraction of equity investments. The absence of dividends makes these shares<strong> unattractive <\/strong>for those who rely on or expect regular cash flow from their investments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"aioseo-2-unlisted-shares\">2. Unlisted Shares: <\/h3>\n\n\n\n<p>Unlike traditional rights shares that are listed on the stock exchange, the <strong>Class-C shares are unlisted<\/strong>(meaning you cannot trade them on the stock exchange), adding another layer of exclusivity. <\/p>\n\n\n\n<p>For retail investors, this is problematic as they want to be able to easily liquidate their funds when needed. They cannot do this when the shares aren&#8217;t traded on the market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"aioseo-increased-voting-rights\">3. Increased Voting Rights<\/h3>\n\n\n\n<p>Each Class-C share carries <strong>fifty voting rights<\/strong> per share. This significant voting leverage compensates for the lack of dividend rights, making the offering particularly appealing to those interested in influence over company decisions.<\/p>\n\n\n\n<p>While the Class-C shares offer substantial voting rights (fifty votes per share), retail investors often lack the collective influence to sway major decisions in a company. The enhanced voting rights may <strong>not be practically valuable to individual investors <\/strong>who hold relatively small amounts of stock.<\/p>\n\n\n\n<p>To truly benefit from the voting rights, a retail investor would need to own a substantial portion of these shares, which may be out of reach for many due to the associated costs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"aioseo-is-this-legal\">Is this legal?<\/h2>\n\n\n\n<p>The right share issue is of course legal. They are being offered to all shareholders, so no one should complain. But it does raise some questions about the management&#8217;s intentions because retail investors have little incentive to hold these shares as they are neither traded nor will receive any portion of profits,<\/p>\n\n\n\n<p>The practice is common in the USA where companies like Google and Facebook have similar structures. However, it is banned in the UK and Australia. <\/p>\n\n\n\n<p>MUGHAL has a 25% free float, which means the company still holds 75% of the shares, which is what is required in Pakistan to appoint a new CEO.<\/p>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>After the issuance of these right shares, the newly issued 50 million shares will enjoy <strong>88% of the voting power<\/strong>. <\/p><\/blockquote><\/figure>\n\n\n\n<p>In this way, the current management will further cement its power on the company while retail investor&#8217;s voting power will reduce(unless all retail investors subscribe to the right shares).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"aioseo-mughals-history-of-right-shares\">MUGHAL&#8217;s history of right shares<\/h2>\n\n\n\n<p>Mughal Steel has issued right shares twice before.<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th>Year<\/th><th>Right Shares<\/th><\/tr><\/thead><tbody><tr><td>2021<\/td><td><strong>16%<\/strong> AT A PREMIUM OF Rs.58\/= PER SHARE (R)<\/td><\/tr><tr><td>2017<\/td><td><strong>100%<\/strong> AT PAR VALUE OF Rs.10\/= PER SHARE<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Here is how the stock has performed in the last 10 years<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"600\" src=\"https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-1024x600.png\" alt=\"Mughal chart Nov 2024\" class=\"wp-image-6529\" srcset=\"https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-1024x600.png 1024w, https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-768x450.png 768w, https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-640x375.png 640w, https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-400x234.png 400w, https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/image-27-367x215.png 367w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n<\/div>\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>Retail investors need to ask themselves the question if they really want to be part of this considering the company&#8217;s lackluster performance. Consider also the fact that the steel industry is facing tough times, which is what has necessitated this right issue in the first place.<\/p><\/blockquote><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"aioseo-conclusion\">Conclusion<\/h2>\n\n\n\n<p>Retail investors could potentially find better value in other equity opportunities that offer both capital appreciation and dividends, without the restrictions tied to this rights issue.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On November 5, 2024, Mughal Iron &#038; Steel Industries Limited (MUGHAL) announced a unique rights share issue involving 50,000,000 new Ordinary Class-C shares. <\/p>\n","protected":false},"author":2,"featured_media":6531,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[42],"class_list":["post-6517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-psx-blog","tag-mughal"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/MUGHAL-STOCK-PSX-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/MUGHAL-STOCK-PSX-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/MUGHAL-STOCK-PSX-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/MUGHAL-STOCK-PSX.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/6517","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=6517"}],"version-history":[{"count":0,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/6517\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/6531"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=6517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=6517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=6517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}