iCreate Limited has set September 26 as the record date for its upcoming $425 million rights issue to be executed next month as it pursues its acquisition of Visual Vibe.com Limited.

In a rights issue, a shareholder is allotted a specific number of new shares based on the number of shares they hold as at the record date. With the ex-date for the rights issue set at September 23, it means persons will have up to September 22 to purchase a share in iCreate to be an existing ordinary shareholder. There are up to 212,500,000 new ordinary shares which might be fully available in the offer as per the notice of the extraordinary general meeting.

If someone sells all their shares on September 23, they will still have a specific allotted number of shares which will be confirmed in the letter of provisional allotment which will be mailed to the address of the shareholder. This is because settlement of transactions on the Jamaica Stock Exchange (JSE) are done under T+2, which is transaction plus two business days. So, the transaction would settle on September 27 which is a day after the record date.

iCreate’s rights issue is meant to fund the acquisition of outdoor advertising acquisition company Visual Vibe which will fall under its advertising division, pay off the $24-million bond owed to Sagicor Investments Jamaica Limited and provide working capital. Visual Vibe earned $160 million in revenue in 2019 along with $80 million and $60 million, respectively, in operating and net profit. The company currently has 13 boards islandwide and will be led by Declan Tully. If iCreate had acquired Visual Vibe from the start of 2022, its six months revenue would be 87 per cent higher at $151.05 million, earnings before tax, depreciation and amortisation 133 per cent higher at $45.26 million and profit before taxation 108 per cent higher at $34.31 million. Visual Vibe forms part of iCreate’s US$2 million ($306 million) in revenue and US$1 million ($153 million) in net profit goal for 2022. iCreate also has a training division, media and entertainment, tech and e-commerce and a real estate division.

iCreate currently has 308,560,242 ordinary shares in issue with the structure of the rights issue pointing to a $2 subscription price. iCreate saw its largest volume of shares traded on Monday of 3,225,562 shares with the stock price trading at $3.99. iCreate’s stock price is up 410 per cent year to date.

The most recent rights issue on the JSE was for Key Insurance Company Limited in January 2021 for 190,863,000 new ordinary shares. Key’s circular letter, which detailed all information around the rights issue, was published on December 16, six days after the record date. The rights issue was renounceable which meant that shareholders could give up their rights to the new shares, wholly or in part, to a third party who did not need to be an existing ordinary shares shareholder.

In Key’s rights issue, a shareholder was entitled to 259 new ordinary shares for every 500 ordinary shares they held at the record date. Since there are no fractional shares on the JSE, the balance is either rounded up or down. So, if you had 750 ordinary shares, you would have a calculation of 388.5 but 388 new ordinary shares provisionally allotted. In a rights issue, the subscription price is the same for all shareholders which was $3.50 in this instance.

A rights issue gives you the right but not the obligation to buy additional shares in the company and maintain your proportional ownership before the additional shares are issued. One can subscribe to their total allotment and apply for any excess shares from the excess pool which consists of shares not taken up by the renunciation/splitting date. The splitting date is when one must indicate whether they will be applying for their allotment wholly or in part, or renouncing their rights wholly or in part to another renouncee(s). If one doesn’t take up the full allotment, it will lapse and fall into the excess shares pool.

The excess pool includes all the excess shares not taken up by the existing ordinary shareholders or renouncees by the closing date of the offer. Shares in this pool were not offered to the public and could only be disposed of to the existing ordinary shareholders who wanted to acquire more shares beyond their provisional allotment or the lead arranger and underwriter GK Capital Management Limited.

While Key’s rights issue was successful in allowing the company to raise $668.02 million, it should be noted that the offer was underwritten by GK Capital for any shares which were not taken up in the offer. The GraceKennedy Financial Group Limited acquired 124,508,083 ordinary shares and maintained its 65.2334 per cent stake in Key. With GK Capital subscribing to 46,683,897 ordinary shares, it meant that only 17,671,020 ordinary shares were taken up along with any excess pool by existing shareholders and renouncees. Key had to pay an underwriting commission for the underwriting agreement.

Sterling Investments Limited had a renounceable rights issue in January 2019 where they attempted to issue 200,000,000 new ordinary shares at $3.08 per share. The offer only had 66,963,042 shares being issued which is 33.5 per cent of the original target. While Barita Investments Limited’s 2019 rights issues were oversubscribed, they were both underwritten by their lead arranger and broker Sagicor Investments Jamaica Limited. Cornerstone Investments Holdings Limited was an underwriter in the February 2019 non-renounceable rights issue. In this rights issue, one could not renounce their rights to another party.