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Question

How does a Rights Issue work?

Answer

Each shareholder initially eligible to participate in a Rights Issue will be issued with a holding of nil-paid rights. The nil-paid stock automatically becomes a tradable line in its own right and is available to sell like any other listed equity.

When allocated nil-paid shares, you have the option to sell in the market or take no action and let the rights lapse (which is the default option if the client does not reply). If you choose to take up the new shares, they are passed from the nil paid stock line to the fully paid stock line and you are debited the take up cost.

Once the Ordinary shares are received, these will be allocated to your portfolio and at the same time the the fully paid line will be removed .

If you have an ISA, you can transfer the nil paids to another Barclays Stockbrokers product or directly into your own name.

This course of action will normally occur if you have subscribed to the maximum amount of money to an ISA in a given year and therefore can not take up within the product that was issued the nil-paids.

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