Recently, I receive my bonus warrants from TIH Limited and was wondering how to exercise it. While trying to do so, I realized that there are people who were unsure of how to exercise their warrants. So here I am, writing a mini tutorial on how to exercise your SGX company warrants and convert them into mother shares.
Step 1:
Find out who your warrant agent is from from SGX.com (Its in the Company Warrants Category)
Step 2:
Call your warrant agent up if you need additional form or if you purchased from the open market as you need them to mail you the warrant exercise form. The phone number is listed on the website above. Give them your address or they might ask you to email them your home address and they will mail it to you accordingly.
Step 3:
Apply for a cashier's order from any bank. The amount on the cashier's order must be equal to the value of the warrants to be converted. Cashier's orders can be ordered using internet-banking for free. I went with DBS. However, the cashier's order from internet banking can only be collected at a few branches. Do check out with branches are available before applying.
A $5 surcharge is chargeable if it is applied at the bank itself and not through internet banking.
Step 4:
Fill up the exercise notice form when you receive it, which will include your name, address, securities account number, and the number of warrants to be converted.
Step 5:
Prepare an envelope and put in your completed exercise notice form (and check that your signature is the same as the one you registered with CDP) together with your cashier's order into the envelope. Although it is mentioned in the CDP website that your latest account statement is needed, in actual fact, it is not. You do not need to send it to the warrant agent. However, this is my information from calling up the warrant agent for TIH Limited. It would be prudent to confirm with your warrant agent.
Step 6:
Affix a stamp and send your company warrant exercise notice.
There, you have done it.
Example:
A company has warrants exercisable for ordinary shares on a basis of one share per warrant at an exercise price of S$1.50, expiring on 31 July 2015.
The current price of the warrant is 30 cents and that of the share is S$1.60.
Each warrant costs you 30 cents. Before 31 July 2015, you have the right to subscribe for the share at $1.50. Your total cost will be S$1.80, compared with only S$1.60 if you buy the share now. The difference of 20 cents is the premium you pay if you believe the share price will rise but you do not wish to commit a large sum of money for the shares now.
After 31 July 2015, the warrant expires and is worthless. You must exercise the warrant, i.e. subscribe for the underlying share, or sell it five market days before the expiry date.
You will not receive any income in the form of interest or dividends on your warrants.
However, as with shares, there may be bonus or rights entitlements for warrants. Do note that the exercise price of warrants may be adjusted to take into account the change in share capital of the company after a bonus or rights issue.
Notes:
The day the warrant agent receive your notice is the Lodgement date. The warrant agent can decide whether to list your shares at the Lodgement date or the following working day.
Once it is listed, your CDP account will be debited of the warrants, and credited with the new shares. The company will also announce on SGX website the number of warrants converted (without names of course).
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