IIF Rights offering

Discussion in 'Stocks' started by tradingblues, Dec 14, 2005.

  1. Please read this first

    So I held the stock with two different brokers. None sent prospectus in time. Also both were small IRA accounts fully invested so there was no way I could get additional money into the accounts to use offer.
    There is no margin so I cannot really sell security and excersize the rights on the same day.
    They wont allow me to transfer the rights To my other non IRA account and use it there.
    I was robbed off 5% discount off market value.
    When i talked to the information agent she just tried to discourage me saying that expected price will be 40.5 (Right! I have learned the math - price ended up being ~38.5)
    I felt like the delay and weired non-transferable offer was intentional so that only selected people get the discounts.
    Why were the rights non-transferable? If they only intended to raise more money while giving long time stock holder some discount. They could do the same with transferable rights and I could actually get the discount.

    Do you think I am right in complaining?
    Who should I complain to?
  2. MR.NBBO


    Complain to your broker/clearing firm who didn't get you the materials in time.
  3. Its useful to find out before you start heavily investing in CEF's how your broker and their clearinghouse will handle CEF's.

    Pershing, which Vanguard and other banks use, doesn't support CEF's for dividend reinvestment (according to my broker who I asked today). So, basically, you have to take dividends in cash and pay your trading fee to buy some more at current market price (instead of auto-reinvesting at discounted NAV without the transaction fee, akin to a DRIP). To me, that's lazy, fat cat, and it sucks. Excuse the vernacular.

    I imagine that since rights offerings are even more arcane to most people, that the bulk of brokerages will screw it up.

    Sorry about your bad luck. I would imagine that if you took your certificate in delivery from the broker and went with a DRIP or reinvestment plan through the plan yourself, you might be able to avoid future problems like this, but I have no specific knowledge of whether it would actually work. (i.e. notices mailed to you instead of your broker or your clearinghouse which promptly deep-sixes it into the round file.)
  4. If your IRA was at Interactive Brokers you could have sold off securities and exercised the rights on the same day. IB offers special margin IRA accounts for the sole purpose of eliminating the need to wait for funds to settle.

    That said, your main complaint should be with your brokers for waiting so long to get you the required documentation.