Rolls Royce is a UK-based company. It recently announced a "rights issue" to help shore up their financial position by issuing new shares, diluting existing shareholders by 77% if they don't take advantage of the rights issue. However, it appears since I'm located in the United States, I'm not allowed to participate in the rights issue.
I can't figure out what the statements on the Rolls Royce investor website regarding foreign investor rights really mean for me. Will my shares be diluted 77% because I can't participate in the rights issue? Do any Bogleheads have experience with this or can share any insights?
Their website states:
If the rights issue is approved, as it can’t be offered in your country, we will arrange to try and sell your rights to new ordinary shares for you, and you will be sent any profit (after expenses) if it is £5 or more.
Here are some excerpts from relevant websites on the rights issue and foreign investor rights:
DESCRIPTION OF THE RIGHTS ISSUE FROM IG.COM
The rights issue will see Rolls Royce allow existing investors to subscribe to 10 new shares in the business for every three shares they currently own. To provide an example, if you owned 1000 Rolls Royce shares at the time of the rights issue then you would be entitled to purchase 3333 new shares.
The new shares will be issued at a price of 32p, which is a 41.4% discount to the theoretical ex-rights price (TERP) per share of 54.6p on the day before the rights issue was announced.
The rights issue is significant for investors. Taking up your rights will allow you to retain your stake by buying more shares at a discounted rate. Those that don’t take up their rights will be heavily diluted.
The recapitalisation will result in 6.43 billion new shares being issued, assuming all rights are taken up, which would result in Rolls Royce’s share capital increasing 333% from 1.93 billion to 8.36 billion shares in issue. Any shareholder that doesn’t take up their rights will be diluted by almost 77%.
ROLLS ROYCE WEBSITE STATEMENT ON OPTIONS FOR FOREIGN INVESTORS
Don’t live in the UK?
Due to local regulations the rights issue cannot be offered in your country.
What can I do?
As a shareholder, your voice still matters and it’s important that you place your vote. If the rights issue is approved, as it can’t be offered in your country, we will arrange to try and sell your rights to new ordinary shares for you, and you will be sent any profit (after expenses) if it is £5 or more.
ROLLS ROYCE WEBSITE STATEMENT SAYING THE RIGHTS ISSUE IS NOT VALID IN THE US
The securities to be issued pursuant to the Rights Issue referred to in the circular have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “US Securities Act”) or under any securities laws of any state of the United States or of South Africa, New Zealand, the United Arab Emirates or any other jurisdiction where the extension of availability of the materials to which you are seeking access would breach any applicable law or regulation, and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States, South Africa, New Zealand, the United Arab Emirates, or any other jurisdiction where the extension of availability of the materials to which you are seeking access would breach any applicable law or regulation except, in the case of the United States, pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.